Financial Reform Fails on Procedural Vote; More Negotiations in Store

They call it a "test" vote, and Democrats' financial reform bill failed.

On an early procedural motion that would have opened up floor debate on financial reform, Democrats failed to garner the 60 votes needed to advance Senate Banking Chairman Chris Dodd's bill.

The biggest surprise: Democratic Sen. Ben Nelson of Nebraska broke ranks with his party and voted "no." Nelson complained that the bill hadn't been sufficiently finalized, in a statement released by his office after voting had ended:
I cannot support proceeding on a bill I haven't seen, but no one should view my vote today as an indication that I won't support the bill currently being negotiated by the Banking Committee. I look forward to seeing what the Committee develops on a bipartisan basis with Republicans, then I will have something concrete to consider...

(Here's another partial theory as to why Nelson voted "no": Nelson has been pushing a derivatives provision, backed by fellow Nebraskan Warren Buffett, the fate of which was still uncertain as of Sunday night, The Wall Street Journal reported. The provision would largely exempt existing derivatives contracts from new regulations, and it's expected to save Buffett's firm Berkshire Hathaway $63 billion. Democrats reportedly agreed to pull the provision.)

The final vote was 57-41, in favor of bringing Dodd's bill to the Senate floor. It was not a shock that Democrats fell short of 60: Republicans, including their top financial-reform negotiator, Banking Committee Ranking Member Richard Shelby, had pledged the GOP would remain united against the current bill.

Senate Majority Leader Harry Reid had announced last week that he would force the issue, pledging to hold a procedural vote Monday whether or not Republicans and Democrats could forge a bipartisan agreement on changes to the bill beforehand. They didn't, and the vote failed.

This vote means more negotiations--negotiations that probably would have happened even if Democrats had succeeded on this vote. Throughout the push for financial reform in the Senate, Dodd's bill has been a work in progress. It appears constantly subject to change, particularly in the portion that deals with derivatives.

It is not entirely clear whether Reid, who has preempted the amendments process before, will allow floor amendments on financial reform, but President Obama posed today's vote as an open door for bank lobbyists as closed-door negotiations resume. In a statement after the vote, Obama warned, "Some of these [Republican] Senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether."

As far as the vote's technical significance goes, it wasn't terribly weighty, as final passage is not particularly close at hand. It wouldn't have advanced financial reform to an actual up-or-down vote--just floor debate, and possible amendments. Cloture votes, on the other hand, signal that final passage either will or won't happen after a 30-hour window.

Had Democrats won this vote, it would have been a boon for them. With at least one Republican agreeing to move ahead, Democrats could have gotten reforms passed faster--barring any internal disputes, like the one that has potentially cropped up with Nelson over derivatives. Failure is not a huge blow.

Politically, it's not so simple as Reid forcing Republicans to vote "no" on a bill they don't like and to look obstinate for doing so. The media has sufficiently reported that Republicans are negotiating with Democrats on this bill--a big, complicated, important bill, mind you--that Republicans haven't come off as purely obstructionist as they did during health care.

Both sides have amped up their anti-bank rhetoric, both trying to appear tougher on banks than the other. With Goldman Sachs CEO Lloyd Blankfein testifying on Capitol Hill tomorrow, that rhetoric figures to get even more heated as Shelby, fellow Republican Sen. Bob Corker, and key Democrats go back to work in attempting to hammer out a compromise.