WASHINGTON - With a showdown vote looming, Democrats are resisting Republican appeals for a broad compromise on financial overhaul legislation and are eager to test whether GOP unity will crack in an anti-Wall Street political climate.
The top negotiators on the regulatory bill - Democratic Sen. Christopher Dodd and Republican Sen. Richard Shelby - professed to be close to a deal during a joint appearance on NBC's "Meet the Press."
But Shelby conceded that "inches sometimes are miles," and the two did not hold a negotiating session Sunday.
Appearing Monday morning on a network news show, Shelby said, "I don't believe we'll have a deal today."
The legislation is the most sweeping effort to rein in financial institutions since the Great Depression. Aimed at avoiding a recurrence of the near collapse of the financial system in 2008, it would create a mechanism for liquidating large firms that get into trouble, set up a council to detect systemwide financial threats and establish a consumer protection agency to police lending. The legislation also would require derivatives, blamed for helping precipitate the meltdown, to be traded in open exchanges.
The House already passed its version of the legislation.
Senate Republican Leader Mitch McConnell on Friday blocked Democrats' efforts to bring the bill up for debate, setting up a vote Monday that will require 60 votes to move ahead. McConnell and Shelby said Sunday that without a deal with Dodd, all 41 Republican senators would vote to stall the start of debate. Shelby said a deal in time for the vote was unlikely.
Rep. Darrell Issa said Monday that 41 "no" votes by Senate Republicans "is a yes vote to more comprehensive reform, more balanced reform."
Speaking on CBS's "The Early Show," the California Republican said the bill the Democrats want to advance in the Senate does not go far enough to restrain mortgage housing giants Fannie Mae and Freddie Mac, which lost billions in bad loans.
But public sentiment was not working in favor of Republicans, as it did to some extent during the health care debate. Public opinion is leaning toward more regulation of large financial institutions, and a Securities and Exchange Commission lawsuit alleging fraud by Goldman Sachs has added the cloud of scandal to Wall Street.
On Sunday, Dodd, D-Conn., agreed to toughen his overarching bill with stronger rules on derivatives, including one that had drawn objections from the Obama administration, according to a Democratic official familiar with the negotiations. Dodd entered into a tentative deal with Agriculture Committee Chairwoman Blanche Lincoln, D-Ark., to incorporate her committee's derivatives provisions into the broader regulatory legislation. At least two Republicans - Sens. Charles Grassley of Iowa and Olympia Snowe of Maine - are on record supporting Lincoln's derivatives package.
Derivatives are the complex securities blamed for helping precipitate the 2008 Wall Street crisis.
One of the most sweeping of Lincoln's restrictions would require banks to spin off their derivatives business into subsidiaries with a separate source of capital. Large banks fiercely opposed the provision. The administration has called for banks to end trading in speculative securities but not to jettison operations that create derivatives markets for clients.
In yet another attempt to attract Republicans, Democrats appeared willing to jettison from the bill a $50 billion fund - financed by large banks - that would have been used to liquidate failing firms once considered "too big to fail." The fund has been one of the main targets of GOP criticism.
Democrats said the time had come to move on with the bill.
"Are we going to start the debate or are we going to shut it down and continue negotiating, negotiating, negotiating?" Sen. Sherrod Brown, D-Ohio, asked on ABC's "This Week" Sunday.
For now, Republicans are using the only leverage they have - the threat of 41 unified votes - to seek a bigger GOP imprint on the bill.
The impasse reflects differences over how to contain large, interconnected financial firms and how to liquidate them when they fail. But Democrats and Republicans also differed on how to protect consumers and how to set limits on previously unregulated exotic instruments such as derivatives.
Dodd has already incorporated a number of Republican ideas into his version of the bill following negotiations with Shelby and Republican Sen. Bob Corker of Tennessee. Democrats, particularly liberals, have become increasingly worried that a compromise with Shelby will limit their ability to amend the bill during floor debate.
Dodd tried to reassure them.
"We can't take care of everything in the bill," he said, referring to his talks with Shelby, R-Ala. "Obviously our colleagues will want to be heard."
Shelby said on ABC's "Good Morning America" that he and Dodd have a meeting scheduled for early afternoon, just hours ahead of the procedural vote. He also said he believes the two sides ultimately will agree on a bill.
"I believe we're going to get a good bill," Shelby said. He said he wants a bill that's going to "put to bed forever the idea that you're going to bail out somebody."
"If they want to trade with their own money, with their own resources, is one thing," Shelby said. "But the idea of ... believing the taxpayers will bail them out, that's a mistake. Both sides are together on that."
"I think that, conceptually, we're very close together," the senator said of negotiations with Dodd. But Shelby also said the bill that emerged from the banking panel had "too many loopholes, and we're trying to tighten it up."