Republicans block Wall Street reform bill

Senate Republicans held ranks on Monday and blocked a Democratic effort to overhaul the financial system and crack down on Wall Street.

In a 57-41 vote, Democrats fell short of the 60 votes necessary to proceed to the Wall Street bill.

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One Senate Democrat, Ben Nelson (Neb.), joined Republicans in voting against the motion. Nelson had reportedly been pushing for a provision backed by Warren Buffett that would have largely exempted existing derivatives contracts from the bill’s new rules.

Senate Majority Leader Harry Reid (D-Nev.) immediately moved to intensify the pressure on Republicans by scheduling additional procedural votes on Tuesday and Wednesday that would open debate on the financial reform bill.

President Barack Obama issued a statement to express his “deep disappointment” that Republicans had blocked opening debate on the measure as other Democrats in the House and Senate rushed to put out statements charging the GOP with holding up the bill.

Reid will have the Senate vote on a motion to reconsider the measure Tuesday and also set up a new vote on a motion to proceed to the bill for Wednesday.

Democrats believe the series of votes will give them political ammunition against the GOP even as they continue negotiations on the issue with Republicans.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he would meet again with his Republican counterpart after the vote to discuss a possible compromise.

Republicans framed their votes as a call for Democrats to work with them on bipartisan legislation and said their opposition would not prevent them from pursing a compromise bill.

“My vote is not a vote against financial reform; instead it’s a vote to insist that the parties continue bi-partisan negotiations to come up with a commonsense bill we can all be proud of,” Sen. Scott Brown (R-Mass.) said in a statement.

The Monday vote came on the eve of one of the highest-profile congressional hearings into the crisis, in which the most storied Wall Street bank is set for a grilling about practices that the Securities and Exchange Commission (SEC) said amounted to fraud.

 Senators are set to question Goldman Sachs CEO Lloyd Blankfein and firm employee Fabrice Tourre about SEC charges that the firm defrauded investors on investments tied to the housing market.

Dodd said last week that he would continue to negotiate with Republicans even if they blocked an effort to bring his bill to the floor.

Sen. Richard Shelby (Ala.), the senior Republican on the Banking Committee, said he would like to reach an agreement this week or next.

“I don’t want to unduly delay anything,” he said before Monday’s vote.

Both members say they are making progress, but the parties remain split on major elements, such as the scope of a new consumer protection office, the power to dissolve a failing financial firm and new regulations on the multitrillion-dollar derivatives market.

 Republican aides said Dodd and Shelby were in close talks on a proposal, known as the “Volcker rule,” to limit the power of big banks. They were also discussing how much power the federal government should have to pre-empt state rules on consumer protection.

 Centrist Republicans such as Sen. Susan Collins (Maine) have suggested spending three or four weeks on crafting a bipartisan compromise.

But Democrats, who are eager to move forward on other issues, say enough time has been spent negotiating the financial regulatory bill.

 The failure to begin debate raises questions over what the Senate will do on the floor this week. It could take up the Food Safety Modernization Act, but a senior Democratic aide said Reid wants to focus on Wall Street reform.

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 Democrats seized on the vote to portray Republicans as standing up for Wall Street banks that helped push the economy into the worst recession since the Great Depression.

 “A party that stands with Wall Street is a party that stands against families and against fairness,” Reid said Monday.

 Seeking protection from Democratic attacks, Senate Republicans said Monday that they have worked on an alternate Wall Street reform bill but offered few details other than to say it would address Fannie Mae and Freddie Mac.

Democrats say the government-sponsored mortgage entities, which share blame for fueling the housing bubble, should be reformed in separate legislation.

The legislation would respond to the concerns of some centrist Republicans who have argued in private meetings that the party should be able to propose its own solutions if it blocks the Democratic proposal.

But few lawmakers were aware of the effort to draft an alternative, giving it the appearance of a last-minute scramble for political cover.

Republican Leader Mitch McConnell (Ky.) said Democratic leaders were trying to stampede his fellow Republicans into supporting bad policy.

“Republicans are also acutely aware of the fact that government solutions to big, complex problems like this one are rarely as effective as they’re made out to be, especially when they’re rushed,” McConnell said.

 He declared that Republican concerns about economic stimulus and healthcare reform legislation have since been vindicated by public opinion and told Democrats to slow down.

“Americans have been rushed by this Congress before,” he said. “They’ve seen the results. They’re not going to be rushed again.”

White House press secretary Robert Gibbs predicted Monday that Republicans would have trouble holding a unified front against Wall Street reform, which polls show has broad public support.

A Washington Post/ABC News poll published Monday showed that almost two-thirds of the public supported stronger regulation of financial institutions. The survey also found that 52 percent trust Obama more than GOP lawmakers to regulate Wall Street.

In a preview of the Goldman Sachs hearing, Sen. Carl Levin (D-Mich.), chairman of the panel, accused the bank of misleading the country and spreading “poison” throughout the national economy.

Levin said the bank sold securities it knew were backed by dubious mortgages and then bet heavily against the investments, earning an estimated $3.7 billion off these short bets.

 
 Jay Heflin contributed to this article.