WASHINGTON — Senate Republicans on Monday blocked the start of formal debate on legislation to overhaul the nation's financial regulatory system in a test vote that is likely to intensify the political battle over who's too cozy with Wall Street, but unlikely to derail the legislation.
The 57-to-41 vote fell 3 votes short of the 60 needed to begin consideration of a bill to overhaul the way financial institutions are regulated in the U.S. in the wake of the worst financial crisis since the Great Depression.
The measure is hardly doomed, though, because its fate rests largely on the outcome of compromise talks among top Senate Democrats and Republicans.
The current legislation, written largely by Democrats, is tougher than what passed the House of Representatives in December. It would force big banks to spin off their divisions that trade in exotic financial instruments called derivatives and would prohibit them from proprietary trading for their own account if they trade on behalf of clients.
Consumers would gain a tough cop on the beat to police mortgages, credit cards and other forms of consumer credit through a new Consumer Finance Protection Agency. There also would be a new process allowing the government quickly to dissolve troubled financial institutions that pose a risk to the broader economy.
Republicans, though, are balking. They want more assurances that taxpayers wouldn't be liable for the failures of large institutions.
Though the bill has no provisions for bailouts, GOP leaders insist there are enough loopholes to allow the government to do just that, even though there are several steps in the overhaul bill intended to right a troubled firm before it reaches a toxic state.
Monday's vote promises to turn up the political volume even louder.
Leaders of both parties have said for days that they're very close to a deal, and Banking Committee Chairman Sen. Christopher Dodd, D-Conn., and ranking Republican Richard Shelby of Alabama, have remained cordial through hours of private talks.
At the same time, public rhetoric has become more polarized, and both parties saw the Monday vote as a headline-grabber, a way to give themselves fresh political ammunition.
Democrats eagerly painted Republicans as too close to the financial interests that triggered the 2008 economic collapse, while the GOP insisted it's protecting taxpayers from another costly industry bailout.