Senate Republicans are prepared to end their stalling tactics on new banking regulations and will attempt to change the bill on the Senate floor, Republican officials said.
Sen. Richard Shelby, the top Republican on the Senate Banking committee, said he has assurances that Democrats will adjust his banking regulation bill to address concerns that it perpetuates bailouts.
The concession sets the stage for Republicans to withdraw objections that have stalled the bill in the Senate.
The agreement does not bridge other significant differences between the parties on the bill.
Democrats tried three times to begin debate on the bill only to be thwarted by Republican opposition. Democrats branded the Republicans as Wall Street allies.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — Republicans have dropped complaints that Senate Democrats' financial overhaul bill would perpetuate bailouts, and are shifting their criticism to a consumer protection provision that they say goes too far.
The change came after Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking committee, said he and the committee's chairman, Sen. Christopher Dodd, had agreed to tighten language in the bill giving regulatory agencies some flexibility to assist banks.
"The first thing we had to ensure with this bill is that it didn't leave taxpayers on the hook for any more Wall Street bailouts," Senate Republican Leader Mitch McConnell said Wednesday. "I raised the alarm on that issue, and the two parties have been looking into it."
But McConnell and other Republican critics are now focusing their objections on Dodd's proposal to create a Consumer Financial Protection Bureau within the Federal Reserve. The agency would have power to police transactions between institutions that provide financial services and their customers.
Republicans says the bill would have unintended circumstances that could ensnare small business people for merely extending credit to their customers.
The shift in argument comes as Senate Republicans continued their unified opposition to the Democrats' proposed overhaul.
By a 56-42 vote Wednesday, Democrats failed again to get the necessary 60 votes to move the legislation to the Senate floor for debate. Without that step, senators cannot offer amendments to the bill.
It was the third such vote in three days, orchestrated by Democrats to maintain pressure on Republicans. GOP senators insist key provisions be changed before formal debate begins.
Democratic Sen. Ben Nelson of Nebraska joined 40 Republicans to vote against the procedural step. Senate Majority Leader Harry Reid switched his vote in the end, a maneuver that permits him to call for another vote. That vote could come later in the day.
Nelson has been critical of a provision in the legislation that places restrictions on derivatives, the exotic securities blamed for helping precipitate the financial crisis in 2008. The Democratic bill would require participants in derivatives contracts, even existing ones, to post collateral to back up the bets.
Among those who would have to put up more money would be firms such as Berkshire Hathaway, the Nebraska company led by billionaire Warren Buffett. Nelson said he objected to the bill because it would impose retroactive conditions on existing contracts.
"It's unconstitutional for a good reason — it's just wrong," Nelson told reporters in a conference call.
Nelson said there was "broad support" for policy position he supports and he noted that Treasury Secretary Timothy Geithner said at a hearing last year that the law needs to be crystal clear that it leaves in place existing contracts.
"The Washington gotcha game has kicked into high gear impugning my motives," he said, noting that questions have been raised over his and his wife's ownership of Berkshire Hathaway stock.
"That has nothing to do with my vote," he said.
While willing to adjust language to ensure the bill did not provide for bailouts, Dodd said he was unwilling to change his consumer protection provisions.
"The two of us are not going to write a bill for 98 other senators who have ideas and thoughts," Dodd said.
Democrats were drawing a line, anticipating that Republican resistance was wearing thin and that the scrutiny of Wall Street, including a fraud lawsuit against Goldman Sachs, will stiffen public sentiment against the excesses of financial institutions.
Few doubt that the Senate will pass an overhaul of financial regulations in an attempt to prevent a recurrence of the crisis that nearly caused a Wall Street collapse in 2008. But Republicans want their imprint on the bill. And bankers appear to want them to succeed as well.
If campaign contributions are any barometer, large Wall Street institutions approve of what Senate Republicans have been doing to alter the regulatory regime envisioned by the Obama administration and its Democratic allies.
The political action committee of Bank of America, for instance, has contributed 57 percent of its $336,000 in 2009-10 donations to Republicans, according to the Center for Responsive Politics. In the 2007-08 cycle, 53 percent of the bank's PAC contributions went to Democrats.
A spot check of contributions by The Associated Press showed that Goldman Sachs' PAC, which contributed predominantly to Democrats between 2007 and 2009, shifted to Republicans in March, contributing $167,500 to Republican members of Congress and their political committees and $117,000 to Democrats. Similar patterns emerged for JPMorgan Chase and Morgan Stanley, whose PACs both shifted to Republicans last month.
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