Senate Fails To Advance Financial Overhaul Republicans stalled an effort to limit debate on sweeping legislation that is considered a cornerstone of President Obama's response to Wall Street's woes. The bill would establish a system for dissolving failing financial giants and create a consumer-oriented agency to safeguard mortgages and other loans.
NPR logo Senate Fails To Advance Financial Overhaul

Senate Fails To Advance Financial Overhaul

Senate Banking Committee Chairman Christopher Dodd (left) dropped a compromise proposal dealing with derivatives. Charles Dharapak/AP hide caption

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Charles Dharapak/AP

Senate Banking Committee Chairman Christopher Dodd (left) dropped a compromise proposal dealing with derivatives.

Charles Dharapak/AP

The Senate failed to move forward Wednesday toward a final vote on far-reaching legislation to overhaul regulation of U.S. financial institutions.

A vote Wednesday afternoon to limit debate on the bill failed to achieve the 60 votes necessary for passage, as a handful of Democrats joined a largely Republican push to stall the measure.

A successful vote to limit debate would have set up a timetable for a final Senate vote by the end of the week. It's unclear now when that vote might take place.

The vote was 57-42, three votes shy of the 60 needed to pass. Three Democrats joined 39 Republicans in voting against the measure.

Among them was Senate Majority Leader Harry Reid, who switched his vote from yes for procedural reasons. Reid, by voting with Republicans, can now call for a new vote at any time — and said he would seek a new vote Thursday.

While the bill appears ultimately headed for final passage, Wednesday's vote put the end game in question, including the fate of several contentious amendments that remained unresolved.

As Wednesday afternoon's vote approached, members of both parties continued to squabble over last-minute amendments — and one proposal fell by the wayside.

The main author of the bill, Sen. Chris Dodd of Connecticut, dropped a compromise proposal dealing with derivatives.

The current bill demands that banks give up their derivatives desks, which deal in complex contracts that investors use to protect against risk and price changes.

Dodd, who chairs the Senate Banking Committee, had tried to promote a plan that would have delayed implementation of the rule for two years, while regulators study it.

Many of those would be the same regulators who have criticized the concept.

But Sen. Blanche Lincoln, an Arkansas Democrat, vowed to fight the compromise, and the financial industry promptly signaled it would not support Dodd's effort. So Dodd chose to withdraw his proposal.

Senate Majority Leader Harry Reid, a Democrat from Nevada, said before Wednesday's vote that his goal was to pass the bill as soon as possible. The bill seeks to create a system for dissolving failing financial giants and creates a consumer-oriented agency to safeguard mortgages and other loans.

Sen. Mitch McConnell of Kentucky, the Republican minority leader, criticized the bill, saying it ignores areas ripe for reform, such as the struggling mortgage giants Fannie Mae and Freddie Mac.

"So they can call this bill whatever they want, but there's no way it can be viewed as a serious effort to rein in Wall Street or to address the problems that caused this crisis," McConnell said.

The Senate also rejected by a 60-35 vote a proposal aimed at lowering credit card rates by making banks and other card issuers abide by state interest rate caps.

The amendment, proposed by Democratic Sen. Sheldon Whitehouse of Rhode Island, would have barred financial institutions from charging interest rates based on what is allowed in the states where they are headquartered.

Amendments Still Alive

Wednesday's vote would have removed the last major Senate obstacle to the bill, the broadest rewrite of the rules governing Wall Street since the 1930s. Passage later in the week would represent a major victory for President Obama, but the Senate bill would still have to be reconciled with a House version, which contains some significant differences.

Democratic Sens. Jeff Merkley of Oregon and Carl Levin of Michigan were awaiting a vote on their proposal to ban commercial banks from trading in speculative investments with their own accounts. The measure, also opposed by financial institutions, would toughen an existing provision in the bill.

While the measure would increase regulations on banks, senators also were scheduled to vote on a measure that would let auto dealers avoid any regulations passed by a proposed consumer protection agency.

Feingold, Cantwell Say No

Breaking with the party were Democratic Sens. Russ Feingold of Wisconsin and Maria Cantwell of Oregon. Feingold said the bill did not go far enough to rein in Wall Street. Cantwell's vote her inability to get a vote on her amendment to toughen controls on the complex securities known as derivatives.

"The test for this legislation is a simple one — whether it will prevent another financial crisis." Feingold said in a statement. "As the bill stands, it fails that test."

Cantwell rebuffed Reid and Senate Banking Committee Chairman Christopher Dodd, who hovered at her Senate desk during the vote in hopes of getting her to reconsider her vote.

Specter, who lost the Democratic primary in Pennsylvania Tuesday, was not in the Senate Wednesday. He had been expected to support the Democrats.

Two Republicans — Maine Sens. Susan Collins and Olympia Snowe — voted with the Democrats. Republican Sen. Scott Brown of Massachusetts said earlier he had told Reid he would also vote with the Democrats. But when the vote came, he sided with his party.

"A senator broke his word with me," Reid said, though he declined to identify the culprit.

Earlier Wednesday, Brown told the Associated Press: "I told him (Reid) I'd support cloture today because I'm satisfied with the process."

With reporting by NPR's Audie Cornish and The Associated Press