Wall Street reform stalls -- again

Updated at 6 p.m. ET

 

Democrats in the U.S. Senate lost out today on their move to end debate on financial reform and hold a final vote on the sweeping bill.

In a surprising turn, the Democrats' proposal to end debate was killed, with the 57-42 vote falling short of the 60 votes needed.

Interestingly enough, it was disagreement among Democrats that caused the vote to fail. All 59 Democratic senators had been expected to support the vote, but in the end several voted against the bid.

Sen. Maria Cantwell, D-Wash., voted no because she wants an amendment included that bans banks from affiliating with investment firms, The Wall Street Journal reported. Similarly, Sen. Russ Feingold, D-Wis., also wanted his amendment to receive more consideration.

The overall financial reform would bring about some big changes on Capitol Hill. It would form a consumer protection agency at the Federal Reserve and keep a closer eye on hedge funds and derivatives. Finally, it would change the way the government handles financial firms that are about to go under, Bloomberg reports.

Republicans said they were worried that the bill makes government too big and doesn't restrain Fannie Mae (FNM) and Freddie Mac(FRE). Democrats say something must be done to prevent future financial crises and mega-bailouts like we've seen over the last few years.

As we come down to the wire, one of the biggest hang-ups continues to be how to handle derivatives reform. The bill requires banks to spin off their derivatives operations into separate companies, but Sen. Chris Dodd, D-Conn., proposed this week to delay that requirement for two years, The Associated Press reports.

The proposal was Dodd's attempt to break an impasse, the AP reported, but in an unusual twist, liberal Democrats and Wall Street bankers got together to oppose him.

 

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Democrats were upset because they thought Dodd was trying to quash the derivatives portion, The Wall Street Journal reported. And Wall Street banks said two years of delays would create so much uncertainty that they couldn't really do anything related to derivatives.

Getting this vote together has not been easy. And the Senate has been busy wrapping up many little pieces before getting to the final decision. Here's what senators have done recently:

• Approved an amendment that would prevent U.S. taxpayers from bailing out other countries.

• Voted to maintain the consumer protection powers of the Federal Trade Commission (just in case the new agency stepped on the FTC's toes).

• Voted to give people free access to their credit scores. Right now, we can access our credit reports, but not our credit scores.

• Agreed to cut a $50 billion fund from the bill. This fund, paid for by banks, would have been used to bail out future failing banks.

Even if this bill passes the Senate, there's much more work to be done. Lawmakers have to mesh the Senate bill with the one approved by the House last December, Forbes reports. Then they all have to vote again on the final bill before sending it to President Obama for approval.

We will continue updating this post with more information throughout the day.