WASHINGTON - The Senate's top negotiators on financial overhaul legislation said Sunday they were not optimistic about striking a bipartisan agreement on key features of the sweeping bill before a showdown vote on Monday.
Sen. Richard Shelby, the top Republican on the Senate Banking, Housing and Urban Affairs Committee, predicted all 41 Republican senators would vote to delay the start of debate, unless continuing weekend talks lead to a deal.
Senate Minority Leader Mitch McConnell said he didn't expect the bill, as drafted by Democratic Sen. Christopher Dodd, the chairman of the committee, would go forward.
"We want to make sure that they don't have the same kind of approach on financial services that they did on health care," McConnell said on "Fox News Sunday."
After health care, the financial regulation legislation has emerged as a top priority for President Barack Obama. The House of Representatives has already passed its version of the legislation.
Both the House and Senate bills represent the broadest overhaul of Wall Street regulations since the Great Depression of the 1930s. They would create a mechanism for liquidating large firms, 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.
Shelby and Dodd said they were moving closer to a bipartisan agreement. Dodd expressed hope that at least one or two Republicans would vote Monday with Democrats on beginning debate. He said he held out hope a deal could be struck in the coming days.
"We're conceptually very, very close," Shelby said. "We're closer than we've ever been."
Both men have negotiated a bill off and on for months. The impasse reflected 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.
Senate Majority Leader Harry Reid has vowed to push forward with the bill, determined to either get enough Republican support to overcome delays or brand Republicans as obstructionists and handmaidens of Wall Street.
Reid and Dodd need 60 votes among the Senate's 100 members to begin debate on the bill-and there are 59 Democrats and Democratic-allied independents.
Even if Democrats are unable to proceed to debate after Monday's vote, Reid intends to keep pressure on Republicans to break a logjam eventually. The political environment favours Democrats. Polls show a public desire to regulate financial institutions, and a recent fraud lawsuit against Goldman Sachs has created a desire by several Republicans not to be seen as obstructing Wall Street legislation.
One of Obama's chief economic advisers, Lawrence Summers, declined to comment on the specific case against Goldman filed by the Securities and Exchange Commission, but he said it underscored the need for new legislation.
"We need far more transparency," Summers said on CBS television's "Face the Nation."
"These off-balance-sheet, non-transparent vehicles with what people call implicit guarantees invite these kinds of problems. And that's why this reform effort is so very, very important," he said.
Summers disputed Republican criticism that the bill left the government open to future bailouts, stressing that the legislation would end firms deemed "too big to fail."
"We do that by providing for death for financial institutions that run themselves into the ground, their systematic liquidation, the wiping out of their equity holders, the removal of their managers," Summers said. "That is central to our vision."
Dodd and Shelby, in a joint appearance on NBC's "Meet the Press," spoke more as partners than antagonists. But the lack of a deal at this stage underscored the pressure on Dodd to not cede any more ground than he already has during months of negotiations with Shelby and with Sen. Bob Corker of Tennessee, another Republican on the banking committee.
"We can't take care of everything in the bill," Dodd said, referring to his talks with Shelby. "Obviously our colleagues will want to be heard."
Corker, appearing on ABC's "This Week," said he hoped Dodd and Shelby would reach agreement on a "template" that would permit more changes to occur through amendments on the Senate floor.
McConnell on Sunday reiterated his call for Democrats to drop from the bill a $50 billion fund, financed by large banks, that would be used to pay for the costs of liquidating a large, interconnected financial firm that is failing. The Obama administration has also said the fund could give creditors false assurances and contribute to risky behaviour.
Democrats have declined to get rid of the provision unless assured the step would provide Republican votes. But McConnell said Republicans have additional concerns and want those addressed as well.
Shelby said he specifically wanted to tighten language in Dodd's draft bill that he said would give the Federal Reserve and the Federal Deposit Insurance Corp. too much flexibility to assist banks in trouble.
Despite their differences, Republicans and Democrats have both wrapped themselves in anti-Wall Street rhetoric.
Corker on Sunday said he intends to offer an amendment that would recoup earnings from executives of firms that fail and have to undergo liquidation. Under Dodd's bill, management of a firm undergoing liquidation would be fired.