Reporting from Washington — Senate Republicans on Monday united to block legislation that would make the most far-reaching changes in financial industry regulation since the Great Depression, slowing but probably not stopping a bill that has been propelled by angry voters who want to crack down on Wall Street.
FOR THE RECORD:
A headline included with an earlier version of this story incorrectly referred to Ben Nelson as Bill Nelson.
The 57-41 vote marked the first Senate showdown over the issue. No Republicans voted for the motion to begin debate on the bill. Sen. Ben Nelson of Nebraska, a Democrat, joined in the opposition.
But the impasse may be short-lived because behind-the-scenes negotiations are aiming to craft a compromise that could win back Nelson and some GOP converts — perhaps by the end of the week.
Monday's vote was largely political theater. Democrats think the GOP will end up looking like obstructionist friends of Wall Street. Republicans welcomed the chance to present themselves as preventing hasty action and holding out for better protection of taxpayers against the excesses of high-flying financiers.
"A party that stands with Wall Street is a party that stands against families and fairness," said Senate Majority Leader Harry Reid (D-Nev.), who switched his vote to "no" at the last minute in a parliamentary move that will enable him to ask for Monday's vote to be revisited, perhaps as early as Tuesday.
Senate Minority Leader Mitch McConnell (R-Ky.), for his part, said the GOP was opposing the motion to begin debate because it believed the Democrats' plan did not do enough to ensure that the government would not again foot the bill for bailing out institutions deemed "too big to fail."
A vote to block the bill from coming to the floor is "a vote for bipartisanship, for working out an iron-clad solution to the problem of too big to fail," McConnell said.
After the vote, President Obama issued a statement saying he was "deeply disappointed" that Republicans voted to block the bill.
"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," Obama said. "But the American people can't afford that."
The push for overhauling the financial regulatory system — like the healthcare battle before it — represents a landmark domestic policy initiative by the president and his Democratic allies in Congress. And it may be their last chance for a major victory before this fall's contentious midterm elections.
Sweeping proposals on immigration, energy and climate change policies are waiting in the wings, and Democrats are looking for ways to press those issues — if only to inspire their grass-roots supporters for the midterm campaign. But Democratic leaders acknowledge that they will be hard-pressed to push those initiatives all the way through Congress.
Part of the problem is a limitation on the Senate's time: Confirming a Supreme Court nominee and dealing with the budget may occupy most of the months remaining after financial regulation is finished. Moreover, energy and immigration policies tend to divide Democrats and, for some, seem politically risky propositions.
In taking on Wall Street, Democrats are emboldened by recent polls showing that two-thirds of Americans favor their legislation — a populist fire fanned by recent fraud charges against Goldman Sachs by the Securities and Exchange Commission. Those charges will come under klieg lights Tuesday when a Senate subcommittee will call Goldman executives to the witness stand.
The financial regulation bill, a version of which has been approved by the House, would place new restrictions on financial institutions and on transactions that have been largely unregulated, establish a consumer protection agency within the Federal Reserve and give the government new power to oversee the dissolution of large failing institutions.
Republicans, wary of defending an unpopular industry, say they are trying to improve the legislation rather than stop it.
Their principal aims are to close loopholes they think will allow government bailouts of failing firms, add restrictions on the mortgage giants Fannie Mae and Freddie Mac, limit the power of the consumer agency and ease proposed regulations on derivatives — complex financial instruments that contributed to the 2008 financial collapse.
Despite the prospect of a bipartisan agreement, Reid pushed for Monday's showdown vote to step up pressure on the GOP and make it easier to portray them in a politically unfavorable light. Jim Manley, Reid's spokesman, added that a GOP clamor for bipartisan agreement might end up being a delaying tactic.
Democrats are divided over just how hard a bargain to drive in negotiations with the GOP.
Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and administration officials have said they would drop or revise a provision setting up a $50-billion fund, financed by bank fees, for the government to oversee the orderly dissolution of troubled financial firms. Republicans argue that the fund and other provisions of the bill leave the door open to future bailouts.
But others contend that the bill is already too watered down. Sen. Bernie Sanders (I-Vt.) and other liberals want to offer amendments that would impose stricter limits on how big banks could get.
Sen. Russell D. Feingold (D-Wis.) said he would oppose any bipartisan deal that "puts the fix in for some negotiated final product."
"Congress' recent history on regulating the financial sector is not a proud one," he said.