Scenarios: How financial regulation fight might play out

WASHINGTON (BestGrowthStock) – Financial regulation reform is at center stage in the U.S. Congress, with the Senate expected to begin crucial test votes within days.

Legislation drawn up by Democrats would bring the sharpest regulatory crackdown on banks and markets since the 1930s.

But it cannot win approval without some Republican support, and the political ground is shifting under the minority party.

Polls show deep public anger at Wall Street, sharpened in recent days by fraud charges against Goldman Sachs.

Democrats are betting Republicans will not want to defy that anger by blocking reforms opposed by Wall Street, especially with congressional elections coming in November.

Here is a look at possible scenarios ahead, based on discussions with analysts, aides and lawmakers.

CLOSED-DOOR DEAL

A bipartisan compromise bill could still be worked out. Senate Banking Committee Chairman Christopher Dodd and top panel Republican Senator Richard Shelby are working on it.

Shelby habitually waits until the last minute to close a deal. Dodd is retiring at the end of the year and is motivated to produce a bill that will help define his legacy.

If Shelby puts his considerable clout behind a compromise measure, its passage in the Senate is virtually assured. That could happen by late May, analysts say.

The next step would be to merge the Senate bill with one approved in December by the House of Representatives. If that happened promptly, President Barack Obama could have a final bill on his desk to sign into law by June or July.

SENATE PROCEDURAL HURDLE

If Dodd and Shelby cannot cut a deal, Democrats will have to do battle with Republicans on the Senate floor.

The Republicans are likely to threaten a filibuster to block the Democrats’ bill. Invoking so-called “cloture” to bar a filibuster takes 60 votes. The Democrats control only 59 votes in the 100-member Senate.

Dodd and the Democratic leadership are looking for one or more Republicans willing to vote for cloture, a procedure by which the Senate places a time limit on consideration of a bill to overcome a filibuster. Cloture would allow formal debate and amendments to begin.

Senate Republicans signed a letter a few days ago saying all 41 of them opposed the reform bill, but analysts spotted a breach in the wall of opposition on Wednesday.

In the Senate Agriculture Committee, Republican Senator Charles Grassley voted with Democrats to approve a narrow measure dealing with derivatives markets. It won committee approval and will be folded into the broader reform bill.

Grassley’s vote showed the Republican leadership may not be able to hold its ranks intact, analysts say, although Grassley himself said his vote was not a signal of what’s to come.

Others on the Democrats’ list of Republicans who might back cloture include senators Bob Corker, Judd Gregg, Olympia Snowe, Susan Collins, Scott Brown and George Voinovich.

Treasury Secretary Timothy Geithner has met personally with some of them this week to discuss the reform proposals.

If a filibuster can be blocked, then Senate debate on the bill can begin. If it cannot, the reform drive will die and Democrats will tell voters that Republicans killed it.

SENATE DEBATE

A long trail, with an uncertain end, may lie between beginning debate on the bill and bringing it to a final vote.

Republicans had a list of 300 amendments they wanted to attach to the bill last month in the banking committee. Most sought to weaken or kill parts of the bill, but the measures were uncoordinated and lacked focus and were withdrawn.

Committee Democrats had a list of 100 amendments of their own, most geared toward making Dodd’s bill tougher. They too were shelved and the bill won committee approval on a party-line vote, sending it to the full Senate.

If the two sides bring those same amendments to the Senate floor, further procedural roadblocks could be thrown up by Republicans, with Democrats at a disadvantage on each one.

Significant delays could follow, but Senate leaders could navigate around this by agreeing to set aside most amendments and let a few, substantive ones come to a floor vote.

Here again, Republicans would face a tricky political judgment, and Democrats’ ability to hold together a pro-reform coalition could be tested on each vote.

Defeat for financial reform could easily result, but legislation could also ultimately be approved.

HOUSE-SENATE COMPROMISE

If the Senate produces a bill, it would have to be merged with one backed in December by the House.

That could be done in a back-and-forth process by the two chambers, or through a conference committee, which is favored by House Financial Services Committee Chairman Barney Frank.

He would play a central role in either case.

OBAMA SIGNATURE

If a House-Senate compromise could be hammered out, it would then go to Obama, who would likely sign it.

Investing Research

(Reporting by Kevin Drawbaugh; Editing by Andrew Hay)

Scenarios: How financial regulation fight might play out