Why financial reform bill is stalled - and why it isn't dead yet

The financial reform bill did not get enough votes to open debate in the Senate Monday. But there appears to be progress behind the scenes, and the bill could resurface this week.

By , Staff writer

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    Sen. Olympia Snowe (R) of Maine speaks to the media following the Senate vote on whether to proceed with debate on the financial reform bill. The motion passed, 57 to 41, but fell short of the 60 votes needed to avoid a filibuster.
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Eighteen months after a near-meltdown on Wall Street, the Senate Monday blocked a move to begin debate on an overhaul of US financial regulation on a near party-line vote, 57 to 41. But the bill could come back to the floor as early as Tuesday, as bipartisan negotiations continue.

President Obama said that he was deeply disappointed by the vote and urged the Senate to “get back to work."

“Some of these senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether. But the American people can’t afford that,” he said a in a statement.

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In fact, negotiations on the final shape of the bill continued up until Monday’s late afternoon vote and are expected to continue into the evening. Both Sen. Christopher Dodd (D) of Connecticut and Sen. Richard Shelby (R) of Alabama, the chair and ranking members on the Senate Banking Committee, say that they are close to an agreement. The Democrats need 60 votes to avoid a filibuster.

“There are still significant discussions that are taking place, and I’m hopeful to get a bill I can vote for,” said Sen. Bob Corker (R) of Tennessee, a key GOP negotiator.

Unlike the bitterly disputed health-care bill, there is broad agreement that the nation needs new rules for banks and financial institutions deemed “too big to fail.” Both sides also support more transparency and oppose further taxpayer-funded bailouts.

“I’ve never seen a bill that has had more bipartisan input that this legislation,” said Sen. Mark Warner (D) of Virginia, who worked on a team with Sen. Judd Gregg (R) of New Hampshire on the bill. “We’re getting closer and closer.”

But Republicans say that today’s vote was premature. They say there are still important negotiations ongoing about issues such as how to prevent further taxpayer bailouts and how to protect small businesses and community banks from unintended consequences of regulation.

Moreover, Republicans say they need to make sure their concerns are in the draft bill before it gets to the floor, because they do not trust Democratic leaders to allow them to freely add amendments to the bill.

“I was assured on health-care reform that there would be an open amendment process and that did not occur,” said Sen. Olympia Snowe (R) of Maine, one of the GOP moderates that Democrats had hoped to swing on this vote.

The decision to force a vote while bipartisan negotiations were still progressing “doesn’t’ serve a purpose beyond politics triumphing over policy,” she said.

In a surprise decision, Sen. Ben Nelson (D) of Nebraska joined all Republicans on a key procedural vote, which fell short of the 60 votes needed to prevent a filibuster. “I’m concerned this legislation will adversely impact Main Street, when the impact needs to be Wall Street,” he said after the vote, citing calls from auto dealers and dentists in his state.

Senator Nelson says he wants to see the entire draft bill before voting to proceed to debate. He is urging colleagues to agree to exempt derivatives contracts from the new rules – a top concern of Warren Buffett, a prominent investor from Omaha, Neb., and one of the elements of the bill still in negotiations.

Related:

Financial reform: why the GOP strategy is risky

Is Harry Reid smart to push for a vote on financial reform?

Obama to Wall Street: financial reform is in your interest

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