Wall Street reform: Let the debate begin

WASHINGTON (CNNMoney.com) -- The Senate officially kicked off debate of Wall Street reform on Wednesday evening.

Republicans waived their right to block the bill, as it became clear Democrats had clinched the 60 votes needed to end the filibuster. There had been three days of standoff, and three failed votes to move forward. But on Wednesday evening the chamber agreed by unanimous consent to debate the bill.

Senate Minority Leader Mitch McConnell said he agreed to begin debate because he was satisfied that enough progress had been made in negotiations on the bill, getting it to a "better starting point," he said.

"Hopefully, we'll have an opportunity to make further improvements in the bill," McConnell said.

The debate had been stalled while Senate Banking Committee Chairman Sen. Christopher Dodd, D-Conn., and the ranking Republican on that panel Sen. Richard Shelby, R-Ala., have been negotiating.

On Wednesday afternoon the two reached an agreement on provisions that would prevent companies from growing too big to fail, as well as the process for unwinding collapsing Wall Street banks.

However, the two senators could not reach a deal about the powers and scope of a consumer protection regulator or the best way to regulate complex financial products that are currently traded in the dark.

For weeks Republicans have been criticizing the Democratic efforts at taking down failing financial firms, saying it would spur bailouts. But on Wednesday, Republicans said they were ready to move forward because Democrats had agreed to some key changes.

The reforms will no longer tax banks to create a $50 billion pot that could be tapped when regulators unwind failing financial institutions, according to a congressional aide.

Republicans had said that fund could be considered a "bailout" because it signaled implicit government intervention.

Also, the bill is expected to be changed to more expressly say that shareholders of failing financial firms up for government-run unwinding will be wiped out.

And the Federal Reserve's emergency lender-of-last-resort powers are expected to be narrowed further, so that such loans are available in real emergencies to help solvent firms in a liquidity crunch.

The top obstacle is how much power and scope to give a proposed consumer financial product regulator, which would be tasked with regulating things like credit cards and mortgages.

Democrats propose sticking the consumer regulator inside the Fed, but to give it broad powers to make rules such as banning penalties on those who pay off their mortgages early. They also want to regulate auto loans, which could impact some auto dealers if they happen to offer a financing package for the cars they sell.

Republicans say the powers are too broad and they want existing regulators to have more of a say on the rules.

Other sticking points remain with regulating bets on complex financial contracts known as derivatives. Lawmakers want to make them more transparent, pushing them onto clearinghouses and exchanges. They also want those making bets to post collateral, backing up the bets.

But Democrats also want to force banks to spin off their swaps desk, or the parts that deal in making such risky bets.

Republicans think the Democrats' crackdown on derivatives goes too far and will harm businesses, such as airlines and farmers, who benefit from making such bets to shed the risk of swings in prices and interest rates. They say it will push the financial industry to make trades overseas.

- CNN's Ted Barrett, Brianna Keillar and Jessica Yellin contributed to this report.