WASHINGTON – Democrats planned to keep up the pressure on Republicans after an expected setback put the brakes on Senate consideration of financial regulations.
But their task got slightly more complicated by the defection — at least for now — of one Democrat, Sen. Ben Nelson of Nebraska.
Nelson voted with Republicans on Monday to deny Democrats the 60 votes they needed to advance the legislation to a floor debate. Democrats were expected to try again Tuesday, and yet again the day after if necessary.
In a statement, Nelson, a conservative Nebraska Democrat, said his vote reflected concerns about the bill raised by Nebraska businessmen. Before the vote, Nelson huddled with Senate Banking Committee Chairman Christopher Dodd to discuss a regulatory item of interest to one Nebraska businessman in particular — billionaire investor Warren Buffett.
The legislation would require derivatives — previously unregulated exotic securities — to be traded in open exchanges and cleared through a third party that would guarantee the contracts. An agreement Monday between Dodd and Agriculture Committee Chairwoman Blanche Lincoln, D-Ark., would exempt existing derivatives from the clearing requirements.
Lincoln's proposal also would have exempted existing derivatives contracts from margin requirements, or collateral. Dodd succeeded in eliminating the collateral exception. That would potentially add significant costs to companies with derivatives portfolios, such as Buffett's Berkshire Hathaway Inc.
"I was prepared to grandfather existing derivatives that have not been cleared, but I can't say you can't have margin requirements," said Dodd, D-Conn., explaining his discussion with Nelson.
In his statement, Nelson asserted that "no one should view my vote today as an indication that I won't support the bill currently being negotiated by the Banking Committee."
At the end, Senate Majority Leader Harry Reid switched his vote to "no," too — a maneuver that will enable him to call for a new tally as early as Tuesday. If that failed, Reid, D-Nev., envisioned another vote Wednesday.
A Tuesday vote would come on the same day a Senate investigative subcommittee planned to draw attention to a Securities and Exchange Commission lawsuit alleging fraud by the giant investment house Goldman Sachs. Scheduled witnesses include Goldman chairman and chief executive Lloyd Blankfein and Fabrice Tourre, the Goldman Sachs trader at the center of the SEC charges.
Democrats believe public pressure and the scent of a Wall Street scandal have given them the upper hand. Republicans themselves have taken up the Democrats' Wall Street-bashing rhetoric and have voiced hope that a bill will ultimately pass.
"All of us want to deliver a reform that will tighten the screws on Wall Street," said Senate Republican leader Mitch McConnell of Kentucky. "But we're not going to be rushed on another massive bill based on the assurances of our friends on the other side."
Richard Shelby, the top Republican on the Banking Committee, again expressed optimism that he and Dodd could strike a deal over remaining differences. "Most Republicans want a bill, but they want a substantive bill," said Shelby, R-Ala.
But while Dodd continued to meet with Shelby, Reid's plan to continue testing Republican resolve illustrated the Democrats' lack of patience for more negotiations.
"We will not tolerate efforts to slow-walk this process or water down this reform," Reid said.