Less than a week after Senate Republicans unleashed a blistering attack on pending legislation to rein in Wall Street, they began striking a more conciliatory tone Tuesday that improves prospects for the bill that is the next major item on President Obama's domestic agenda.
Many Republicans appear to be shying away from another scorched-earth battle like the one they waged over healthcare, a sign that they may have reached their limit for being portrayed as the "party of no," particularly on the issue of financial reform.
Last week, Senate GOP Leader Mitch McConnell (R-Ky.) charged that the Democratic-backed legislation
left the door open to big government bailouts in the future. He produced a letter opposing it signed by all 41 Republican senators. That is the number of votes needed to sustain a filibuster.
But now Republicans seem intent on making it clear that they want to change the financial overhaul bill, not kill it.
"This one is a little bit different," said Sen. John McCain (R-Ariz.), the party's 2008 presidential nominee and leader of the opposition to healthcare and economic stimulus bills. "We want to keep 41 votes together to have a negotiating position; on healthcare, we didn't like any of it."
Sen. Susan Collins, a moderate Republican from Maine, was the last to sign the letter and did so only after the language was softened to drop filibuster threats in favor of substantive criticism of the legislation.
"I felt it was important to accomplish two goals in the letter: to send a signal that Republicans are in opposition to the bill, and to indicate that we were for a financial reform bill," Collins said. "There is widespread agreement that we must deal with too-big-to-fail institutions."
Even McConnell softened his tone Tuesday, saying he was "heartened to hear that bipartisan talks have resumed" – even though Democrats say they were never suspended.
But he said the GOP's show of party unity had spurred the talks to intensify.
"I'm convinced now that there is a new element of seriousness attached to this, rather than just trying to score political points," he said.
The Senate bill, approved by the Senate banking committee on a party-line vote in March, aims to prevent economic crises by tightening government oversight of financial firms, creating an agency to protect consumers in the financial marketplace, and granting the government new powers to seize and dismantle huge financial firms on the brink of failure if their collapse threatens the economy.
The bill includes a $50-billion fund, financed by the financial services industry, to help the government cover the costs of such a forced shutdown.
The last – and among the most controversial – elements of the legislation will be put in place Wednesday, when the Senate Agriculture Committee is expected to approve strict rules for the unregulated market for derivatives. Those complex instruments, which among other things enable vast sums to be bet that other securities will lose value, led to some of the key failures and bailouts of the crisis and are at the heart of the government's recently filed fraud case against Goldman Sachs.
The financial-services industry opposes the legislation on grounds that some key provisions are unnecessary and too restrictive, and would inhibit its ability to compete in the global economy. Some provisions are also likely to cost the industry billions of dollars in profits on the sale of financial products that regulators deemed too risky.
Republicans oppose the bill – at least as initially drafted – because they say it means more government bureaucracy and more intrusion into the private sector, and could permit future bailouts.
Outsized earnings announced by Goldman Sachs on Tuesday gave the Democrats more ammunition for their effort to control the risk-taking that triggered the financial crisis and has left average Americans still struggling as Wall Street returns to big profits.
Senate Majority Leader Harry Reid (D-Nev.) said he planned to begin debate on the issue within the next few days or early next week. If Republicans object, it will take a 60-vote majority of the Senate to formally bring the bill to the floor. For Reid to prevail, at least one Republican will have to defect.
Democrats delight in the prospect of Republicans voting, en bloc, to keep the debate from even starting at a time when voters are furious at Wall Street. Support for a financial industry crackdown is far more widespread and intense – 77% favor legislation like Obama's, according to a poll conducted for the White House and Senate Democrats – than it was for Democrats' healthcare legislation.
"Much more than in healthcare, Democrats are in a position to drive a very hard bargain for a very tough bill," said Democratic pollster Geoff Garin. "On healthcare, many Americans saw some benefit in maintaining the status quo. In this issue, the only people who see benefit in maintaining the status quo are the higher-ups on Wall Street."
Opponents of the bill say, however, that the public is wary of details of the bill, such as the new consumer-protection agency. GOP pollster Jon McHenry found, in a survey conducted in six states for the U.S. Chamber of Commerce, that voters preferred, by a 2-1 margin, that consumer protections be increased through existing agencies, not by creation of a new one.
The survey also found that a majority of voters – by a margin as high as 62% to 28% in Tennessee – were more worried that Congress would rush the bill through than that it would not act quickly enough.
"Financial reform is too important to ram through without broad consensus and without studying its impact on consumers and small businesses," said David Hirschmann, president of the Chamber's Center for Capital Markets Competitiveness, a leader of the opposition to the bill.
But Sen. Bob Corker (R-Tenn.), who has been involved in months of behind-the-scenes negotiations to draft a bipartisan bill, said the heated partisan debate had obscured how close the two sides were to an agreement. He took his own party to task for what he said was overblown and misleading rhetoric.
"The way this whole debate has been framed is to me very low-level and very silly," he said. "And even the things that we've been saying on our side of the aisle about bailouts and all that, they miss the point and I think take us off on a bunch of rabbit trails."
Times staff writer Jim Puzzanghera contributed to this report.