WRAPUP 6-US Senate fails to end debate on bank reform bill

* Reid plans to try again on Thursday to end debate

* Specter, after losing in primary, misses key vote

* Feingold doesn’t think bill strong enough -spokesman

* Dodd retreats from move to suspend derivatives provision
(Adds Brown spokesman comment, paragraph 9)

By Kevin Drawbaugh and Andy Sullivan

WASHINGTON, May 19 (BestGrowthStock) – In a setback for the Obama
administration, Senate Democrats failed to muster enough votes
on Wednesday to end debate on the biggest overhaul of financial
regulation since the 1930s, delaying a vote on passage.

But analysts still expect the legislation eventually to
pass. More debate on amendments was likely, with banks on alert
for changes that could threaten their profits.

Senate Democratic Leader Harry Reid scheduled another vote
for 2:30 p.m. EDT (1830 GMT) Thursday.

In the 57 to 42 vote, two Democrats sided against invoking
“cloture” to limit debate and move toward final passage. Sixty
votes are needed to end debate in the Senate. Two Republicans
voted with a majority of Democrats for cloture.

The loss seemed to come as a surprise to Democrats on a
measure that enjoys widespread public support.

As backers of the bill scrambled for votes, Democratic
Senator Arlen Specter was nowhere to be found one day after he
lost a primary challenge in his home state of Pennsylvania.

“I don’t have a sense on when he will be back,” an aide
said.

Reid said one lawmaker had gone back on his word to support
the bill. He declined to name the lawmaker, but a Democratic
aide said it was Republican Scott Brown, who has backed
Democrats on other tight votes.

Brown voted against the bill because it would cost jobs and
did not include measures he thought would be in there, a
spokesman said. “He made that clear before his vote and after,”
spokesman Colin Reed said.

The procedural setback mirrored those that took place
nearly a month ago, when Republicans prevented the Senate from
beginning debate on the bill before eventually giving in.

DEMOCRATIC AGENDA DELAYED

The delay means the Senate will have less time to work on
job-creation legislation and other Democratic priorities.

In the meantime, Democrats noted that Wall Street is still
operating under the same regulations that were in place during
the 2007-2009 financial crisis that set off a deep recession.

“They want to let Wall Street off the hook,” Reid said of
Republicans.

The vote came near the end of a turbulent day in which
Democrat Christopher Dodd, manager and author of the bill,
backed away from a confrontation with another powerful Senate
committee chairman over swaps market regulation.

In a move to defuse tension with fellow Democrat Blanche
Lincoln, Dodd dropped an attempt to kill a Lincoln proposal
that would force banks out of the swap-trading business.

Wall Street, which dominates the swaps business and reaps
huge profits from it, firmly opposes the Lincoln proposal.

The Dodd bill is a top priority of President Barack Obama,
who wants to tighten the rules for banks and markets to prevent
a recurrence of the 2007-2009 financial crisis, which tipped
the economy into a deep recession and caused huge taxpayer
bailouts of banks and a voter backlash.

Political momentum has been running heavily against Wall
Street, which fought for months to kill or weaken the reform
bill, only to see lawmakers further tighten the rules.

Politicians from both parties want to show voters they are
getting tough on Wall Street before November elections.

BANK PROFITS THREATENED

Dodd, Banking Committee chairman, has fended off proposals
from some Democrats that could upend the financial industry,
but analysts expect the final legislation will still cut into
profits for banks and other firms on Wall Street.

“The final bill will contain fundamentally tough reforms,
creating many headwinds to banks’ profitability,” analysts at
FBR Capital Markets wrote in a research note.

The failed cloture vote lets lawmakers keep pushing for
proposals that otherwise would fall by the wayside.

Democratic Senator Maria Cantwell, one of two Democrats to
oppose cloture, continued after the vote to press for tighter
regulation of derivatives.

A spokesman for Russ Feingold, the other Democrat to vote
against cloture, said he did not believe the bill was strong
enough to prevent another financial crisis.

Later in the evening, the Senate rejected a proposal that
would have allowed states to enforce interest-rate limits on
credit-card issuers located beyond their borders.

The 35 to 60 vote was a victory for large banks like
JPMorgan Chase (JPM.N: ) that have suffered several other
legislative defeats elsewhere in the bill.

Democrats have kept in play an effort to toughen rules
preventing banks from engaging in high-risk proprietary
trading. Republicans have blocked it from coming to a vote, but
its Democratic backers kept it alive with a parliamentary
tactic.

The amendment from Democrats Jeff Merkley and Carl Levin
would limit regulators’ leeway to water down the rule first
proposed in January by Obama and White House economic adviser
Paul Volcker.

Few Republican amendments to weaken the bill remained.
Among the most significant was a proposal by Senator Sam
Brownback to exempt automobile dealers from a new
consumer-protection bureau, which Republicans argue could
saddle small businesses with onerous regulations.

OTC DERIVATIVES AT ISSUE

Dodd’s move on the Lincoln provision meant Democrats still
had some decisions to make on regulating OTC derivatives.

As drafted now, the Dodd bill contains Lincoln’s proposal
to force banks to separate their lucrative swap-trading desks
from their core operations. Dodd floated a compromise on
Tuesday to suspend the Lincoln provision for two years.

But he backed down after Lincoln, chairman of the Senate
Agriculture Committee, said she would fight to defend her plan
and after markets complained that Dodd’s compromise would cast
a two-year cloud of uncertainty over the derivatives market.

Lincoln faces a tough electoral challenge from the left in
her home state of Arkansas. Some analysts had expected her to
quietly drop her rule after Tuesday’s primary Senate election.

But she failed to win 50 percent of the vote against
Lieutenant Governor Bill Holder, setting up a June 8 runoff.

Dodd could try to remove the provision when Senate
negotiators reconcile their bill with one approved by the House
of Representatives in December.
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(Additional reporting by Thomas Ferraro, Rachelle Younglai,
Richard Cowan and Charles Abbott; Editing by Jan Paschal, Gary
Hill)

WRAPUP 6-US Senate fails to end debate on bank reform bill