The showdown on the Senate floor has as much to do with bill's specifics as it does the midterm elections.
WASHINGTON - Senate Republicans, united in opposition to the Democrats' legislation to tighten regulation of the financial system, voted Monday to block the bill from reaching the floor for debate.
As both sides dug in, the battle has huge ramifications for the economy and for each party's political prospects in this year's midterm elections.
Republicans pledged to hold out for significant changes to the bill even as they acknowledged the political risk of appearing to obstruct a popular cause. They accused the Democrats of rushing the most far-reaching overhaul of the nation's financial regulatory system since the aftermath of the Great Depression.
Democrats charged that Republicans were leaving the country at risk of another financial calamity and siding with wealthy corporate interests.
Both sides, however, say they expect the overhaul eventually will be approved.
Sensing political momentum at a time of deep public anger at Wall Street, Democratic leaders said they would keep the regulatory bill on the floor -- and delay the rest of their busy legislative agenda -- to ratchet up the pressure on the Republicans. Combined with signs of economic recovery in many parts of the country, Democrats said they believed the fight over financial regulation could help turn the tide of anti-incumbent sentiment that has them bracing for substantial losses in November.
Republicans, too, see major advantage in their stance, with the party's Senate leader, Mitch McConnell of Kentucky, using the issue to bolster his overarching political argument this year: that the Democrats' one-party rule in Washington is detrimental.
McConnell, in a floor speech on Monday, rattled off a list of major legislation that he said had not benefited Americans in the ways Democrats had promised, including the economic stimulus measures and the health care legislation. "The days of taking the Democrats' word for it are over," he said.
The financial overhaul bill is a priority of President Obama. Following the vote, the president said he was "deeply disappointed" and urged Senators to put the interests of the country ahead of party.
An expected outcome
The vote was 57 to 41, as Democrats fell short of the 60 votes needed to cut off a filibuster of a motion to proceed.
One Democrat, Sen. Ben Nelson of Nebraska, sided with Republicans apparently out of concern over a provision related to tightening the rules on derivatives trading that was of particular concern to Berkshire Hathaway, the investment company controlled by Warren Buffett and based in Omaha.
At the last minute, the Senate majority leader, Harry Reid of Nevada, switched his vote to side with the Republicans -- a strategic maneuver that lets him call for a repeat vote, which is expected on Tuesday. Two Republicans did not vote: Sens. Christopher Bond of Missouri and Robert Bennett of Utah.
With the exception of Nelson's opposition, the result was expected: Republicans had warned for more than a week that they would block floor debate of the legislation.
In the days ahead, the fight in the Senate seems likely to hinge on a question raised forcefully in recent days by McConnell: Does the legislation still contain loopholes that could allow future taxpayer-financed bailouts of failed banks and other collapsed financial firms?
Democrats say the bill is written specifically to prevent such bailouts, and have accused Republicans of blatantly misrepresenting the measure. But Republicans insist government bailouts are still possible. They point to language, for instance, in a chapter on liquidating failed banks that establishes a "strong presumption" of losses for creditors and shareholders. Some Republicans say those losses should be mandatory.
What's in the bill
The bill, developed over months of talks between senators in both parties, would touch every aspect of the financial system.
It would authorize the government to shut down a financial institution deemed to pose a threat to stability of the system, using a $50 billion fund financed by big banks to help the failed company meet financial commitments as it winds down.
The bill would also establish a consumer protection agency designed to end predatory lending practices and require that consumers receive detailed information on mortgages, credit cards and other financing.
It would provide new oversight of hedge funds, and impose tough rules on the trading of derivatives, the financial instruments that were at the center of the 2008 economic crisis.
It would restructure the federal system of banking regulation, moving many smaller banks out from under the Federal Reserve; and providing shareholders of public companies with greater say in electing directors and an advisory role on executive pay.
The GOP's version
The Republicans said there were numerous problems in the Democrats' legislation -- from the omission of provisions dealing with the mortgage giants, Fannie Mae and Freddie Mac, to disputes over the specific language. They said the bill would give too much power to the new consumer protection bureau.
Republican aides on the banking committee said they were working to finalize their own version of a financial regulatory bill that would stand in contrast to the Democrats' proposal. But they said it was unclear when, or if, they would release it.
The Washington Post contributed to this report.