WASHINGTON — Senate Republicans agreed Wednesday to drop their three-day effort to block debate on historic legislation to overhaul the nation's financial regulatory system after efforts to craft a bipartisan agreement ended with Republicans winning few concessions.
There was no formal vote on the move to begin debate, which was agreed to when Majority Leader Harry Reid of Nevada late Wednesday asked for unanimous consent of the Senate and there was no objection. The Senate had failed on three earlier efforts to begin debate in the face of unanimous Republican objection.
The Senate should take about a month to work through the legislation, and if it passes, it will have to be reconciled with a different version that the House of Representatives passed last year. Then each chamber must pass identical versions before President Barack Obama could sign it into law, which is unlikely before July.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., promised a Senate debate that would allow time for all points of view. “It is time for debate to begin,” he said, “and it must be a serious, vigorous debate.”
Republicans remained guarded about the bill. "I continue to be concerned about several provisions,” said Sen. Susan Collins, R-Maine, who's in the small band of party moderates that Democrats hope to win over.
The bill would make it easier for the government to move fast to dissolve troubled financial companies that pose a risk to the economy, and would create a tough new consumer-protection agency to keep an eye on mortgages and other forms of consumer credit.
It also would require big banks to spin off divisions that trade in derivatives — exotic financial instruments that helped cause the recent deep recession — and would bar them from proprietary trading of them for their own accounts if they also trade on behalf of clients.Derivatives are bets between private parties. Their value is derived from price movements of underlying assets.
The fight over regulating derivatives is expected to be one of the more unpredictable battles in coming weeks. Some Democrats think that their colleagues have gone too far, and Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee, complained that the plan that the Democratic-dominated Senate Agriculture Committee approved last week was developed “behind closed doors."
“The provisions as currently drafted would have far-reaching and devastating effects on these businesses and our economy, increasing the cost of nearly every product we use and negatively impacting job growth,” Shelby warned.
Republicans tried to show some gain from their three-day delay, when they blocked three motions to proceed with formal debate by maintaining united opposition. Some Republicans said they anticipated that Democrats would abandon the idea of a $50 billion bank-financed fund to help liquidate troubled institutions, though Dodd declined to abandon it in his negotiation with Shelby.
Senate Republican leader Mitch McConnell of Kentucky boasted that the Dodd-Shelby negotiations had produced changes in the draft bill "to end taxpayer bailouts and the dangerous notion that certain financial institutions are too big to fail."
Democrats, and independent analysts, said the bill never included terms for taxpayer bailouts.
Republicans were unable to tout any other major gains. They were concerned that the new consumer agency would inflict onerous regulatory requirements on small businesses and make it difficult for them to attract investment.
Dodd called that a false claim, but Shelby remained concerned.
“This bill still contains a sprawling new consumer protection bureau that will find and force its way into facets of our economy that had nothing to do with the housing crisis,” Shelby said. “This massive new bureaucracy would have unchecked authority to regulate whatever it wants, whenever it wants, however it wants.”
One reason Republicans gave up their fight Wednesday appeared to be a sense that they were losing the political game, particularly after Tuesday’s well-publicized Senate hearings featuring executives from Goldman Sachs, the embattled New York investment firm. Senators flogged the bankers, charging foul play, and Republicans ran a risk of negative public reaction by blocking a bill aimed at policing Wall Street.
“I don’t think this helps Republicans, and it could have blown up on Democrats,” former Senate Republican leader Trent Lott of Mississippi said about the Senate's gridlock and failure to move the overhaul legislation. “Out in the real world, people say, ‘What is systemic risk?’ or “What is a Sen. Olympia Snowe, R-Maine, who voted with Democrats in the end, would say only, “You can’t focus on politics when you have such a monumental issue at stake.”derivative?’ They want something done.”
Evans Witt, the chief executive officer at Princeton Survey Research, a political research firm, saw the GOP as wounded more than Democrats were.
“If you say something long enough, it becomes true. Democrats have been saying from Day One, 'Republicans are blocking this,' and fair or unfair, accurate or inaccurate, that’s become the litany.”
MORE FROM MCCLATCHY
For more McClatchy politics coverage visit Planet Washington