GOP Lifts Block of Financial Reform Debate

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Last updated at 11:40 p.m. EST

epublicans abandoned their blockade against legislation to clamp tough new controls on Wall Street Wednesday, clearing a road to likely passage for America's most sweeping rewrite of financial rules since the Great Depression.

Democrats and Republicans agree the Senate will ultimately pass landmark changes aimed at preventing a recurrence of the crisis that imperiled financial system in 2008, but the battle now begins over crucial details. The House of Representatives has already passed its version.

Democrats said the Republicans had given in after three days of votes to block debate, realizing they were on the losing end of a battle for public opinion. Republican lawmakers said they would now switch to trying to change the bill on the Senate floor.

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After trying three times to bring the bill to the Senate floor for debate, Democrats were ready to keep the Senate in session overnight to pressure Republicans to drop their opposition to debate, CBS News Capitol Hill Producer John Nolen reports. The Democrats also have been laying plans to make the legislation a major issue in midterm elections this summer and fall. The Republican retreat came one day after senior executives of Wall Street giant Goldman Sachs were denounced by lawmakers from both parties at a marathon Senate hearing.

President Barack Obama, winding up a Midwest tour promoting the legislation, told reporters he was pleased the debate would proceed and that he hoped to sign a final version "very soon." That was unlikely to occur for at least two weeks.

"We'll end up having a safer, more secure financial system," Obama said, "and I think banks and other financial institutions can get back to making money the old-fashioned way by lending it to companies to build business and create jobs and do all the things we want our financial system to do."

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In the debate that now can proceed, both Democrats and Republicans will attempt to change the underlying bill. Republicans will take particular aim at the magnitude of consumer-protection provisions that Obama says are vital. Liberal Democrats are expected to seek to limit the size of banks.

The Republican decision to relent came after Sen. Richard Shelby, the top Republican on the Senate Banking committee, told his colleagues that he could win no further concessions from Banking Committee Chairman Chris Dodd in private talks. He said Dodd did agree to adjust some provisions that Republicans had complained would permit further bank bailouts.

But there were already signs that some Republicans were growing weary of continuing to block the bill after Obama and other Democrats accused them of siding with Wall Street, an institution that rivals Congress in its unpopularity.

How the debate unfolds will determine whether the legislation achieves significant bipartisan support. Democrats still need 60 votes to get past procedural obstacles, a number they can't reach without at least one Republican on their side.

The bill would establish a nine-member Financial Services Oversight Council, including the treasury secretary, Federal Reserve chairman and the heads of regulatory agencies to monitor markets for threats, such as the bubble in housing prices and mortgage-backed securities that preceded the financial near-collapse two years ago.

The Federal Reserve would begin policing large bank holding companies and interconnected nonbank institutions whose collapse might pose a threat to the economy. With approval of the council, the Fed could even break up complex companies that posed a grave threat.

Most investment derivatives - such as the hundreds of billions of dollars in complex instruments blamed for accelerating the crisis two years ago - would have to be traded on regulated exchanges.

Shelby said Wednesday he had received assurances that Democrats would adjust the bill to address Republican concerns that it would perpetuate bailouts of banks.

Republicans said they now expect Democrats to jettison a $50 billion fund that would have been financed by banks to help liquidate large failing institutions. The Republicans said they also expect Democrats to tighten language so the bill would mandate that shareholders' stakes in a failing firm be wiped out. The current bill says there would be that presumption.

Democrats tried three times to begin debate on the bill only to be thwarted by Republican opposition. Democrats branded the Republicans as Wall Street allies. But Republicans said they were merely trying to secure changes to make the bill more bipartisan.

Republicans say the bill would have unintended consequences that could ensnare small business people for merely extending credit to their customers.