Senate Democrats are close to holding a final vote on a major financial reform bill tomorrow but disagreement over a few controversial measures threatens to drag the process into next week.
A cloture vote was scheduled for 2 p.m. ET Wednesday, but Majority Leader Harry Reid of Nevada called for a recess until 3:15. It's unknown at this time when the vote will take place.
Under Senate rules, 60 votes are needed for a cloture vote, which would cap additional debate at 30 hours and prevent a filibuster. Based on that timeline, a final vote would not happen until Thursday evening.
Obstacles to a yes-or-no vote at this point involve three key issues as well as the votes of both Democrat and Republican members.
Sen. Carl Levin (D-Mich.) is threatening to vote against cloture, unless the Senate leadership agrees to hold a vote on a amendment he has co-sponsored with Democrat Jeff Merkley of Oregon.
Levin and Merkley, who are considered two of the progressive members of the party, are pushing an amendment that would make the Volcker rule law. The chief objectives are to restrict the proprietary trading activities of Wall Street firms and bar them from "engaging in high-risk speculation'" through derivatives and other products.
The restrictions would affect Wall Street firms such as Goldman Sachs , now under investigation for some of its trading activities, as well other big financial firms.
President Obama is a strong supporter of the measure.
The senators have tweaked the amendment, perhaps to make it more appealing to the GOP, by excluding firms not engaged in traditional banking. Another change would allow banks to continue to sell, or securitize, loans they make, preserving a large market.
More broadly, the amendment complements new regulation of over-the counter derivatives, meant to reduce leverage and risk.
A somewhat unpopular measure—crafted by Banking Committee Chairman Chris Dodd (D-Conn.) and Sen. Blanche Lincoln (D-Ark.), chair of the Agriculture Committee—that would force banks to create special subsidiaries for their swaps operations may be revised and watered down.
A new compromise proposal spearheaded by Dodd would call for a two-year study to see if the restriction—which is not in the House version of the bill—is merited.
Another key component—creating an over-the-counter trading and settlement system—has fairly wide support, but some would like a strong end-user exemption for companies that use derivatives as an operational hedge.
The other big battleground is the creation of a powerfulregulator to protect consumers from potential abuse by financial services companies, especially in the area of mortgages.
As proposed by Dodd, the Consumer Financial Protection Bureau would be an independent agency housed at the Federal Reserve with a presidentially appointed director, rule-making, examination and enforcement powers.
Having failed to water down its core authority, opponents have been trying to weaken or remove a provision allowing states to interpret and, if desired, toughen the rules, which would make firms subject to a potential blizzard of regulations.
An amendment by Sen. Tom Carper (D-Del.) specifically prohibiting states from enforcing the consumer laws and reserving that authority to federal regulators was approved Tuesday, which might help pave the way for approval.
Another amendment, sponsored by Sam Brownback (R-Kansas), would exempt auto companies, an idea Dodd himself fiercely opposes.
Senate Democrats have been trying to push through The Wall Street Reform Act for almost a month, despite a number of procedural obstacles possible only in the Senate, and thus catch up to the efforts of the House, which approved its version of financial reform late last year.
Many of the provisions, from too-big-to-fail authority to new capital requirements, are meant to avoid the possible collapse and government bailout of big firms, as was the case with AIG , Citigroup and Bank of America in 2008.
Some restrictions would also affect the two big remaining Wall Street firms, Goldman Sachs and Morgan Stanley .
Well over 300 amendments to the reform bill have been filed, but most of them won't get to the vote stage. The Democratic leadership is trying to streamline the legislative process to hasten a final vote, as well as preserve as much of the original Dodd version as possible.
Passage is almost assured, especially if the bill contains enough compromise measures to attract the support of a few moderate Republicans, should 60 votes be needed.
The president has said he wants to sign a compromise measure into law by Memorial Day weekend, but Congressional sources say sometime closer to the Fourth of July now looks more realistic.