GOP again blocks Wall Street reform debate

WASHINGTON (CNNMoney.com) -- Senate Democrats failed Tuesday - for the second time in two days - to muster the 60 votes needed to start debating Wall Street reform.

The official vote was 57-41 in favor of moving forward with Senate Majority Leader Harry Reid, D-Nev., switching his vote from "yes" to "no," in a procedural move that allows him, under the Senate rules, to bring the bill up again as early as Wednesday for another vote.

Reid accused Republicans of preferring to work "behind closed doors, instead of on the floor of the Senate in full view of the public," he said in a statement.

Sen. Ben Nelson, D-Neb., again joined 39 Republicans to vote against the proposal to officially start debating the Wall Street reform legislation before other lawmakers on a Senate Banking panel negotiate a deal. Two Republicans did not vote.

"We think this is the best way to get a better bill," said Senate Minority Leader Mitch McConnell, R-Ky., explaining why his caucus has united to block the bill's movement for two days.

Democrats and Republicans still disagree about the way to go about preventing future bailouts, cracking down on risky bets and ensuring consumers have stronger protection.

Sen. Christopher Dodd, D-Conn., and Sen. Richard Shelby, R-Ala., have been negotiating differences on the bill but have yet to come up with a final compromise.

Several GOP moderates, including Sen. Scott Brown, R-Mass., and Sen. Susan Collins, R-Maine, told CNN they don't consider themselves blocking regulatory reforms - and they don't feel pressured to vote to start the debate before a deal is negotiated.

"It's not just simply blocking it for the sake of blocking it," said Sen. Olympia Snowe, R-Maine. "Rather than just insisting on votes, why not be working -- like they did on derivatives through the weekend -- on the question of the other aspects of the bill that raise legitimate questions?"

Nelson told CNN that he worried about the legislation's impact on Main Street and that he didn't want to push forward a bill that isn't finalized.

But he also said he is opposed to the bill's tough provisions cracking down on financial products called derivatives. He thinks that existing derivative contracts should be grandfathered in under weaker rules now in place that allow trades to be made in the dark.

"It's a matter of constitutional correctness," Nelson said Tuesday. "You can't derogate a contract ... that's in existence without it becoming a taking."

The investor Warren Buffett, who runs the firm Berkshire Hathaway (BRKB), has been pushing for such a grandfather clause and his company is in Nebraska.

Buffett is credited with coining the phrase "financial weapons of mass destruction" in describing derivatives, which is often repeated by lawmakers calling for tougher rules.

Shelby said Tuesday that the "biggest obstacle" is how much power and scope a proposed consumer financial product regulator would have in regulating things like credit cards and mortgages.

"We made great progress on the strengthening what came out of the Banking Committee dealing with the too big to fail," Shelby said. "They basically liked some of the recommendations that on a staff level we've worked on to strengthen that. "

He said the two had made great progress resolving differences on the issue of unwinding financial firms and preventing them from getting too big to fail, but he didn't detail how.

Shelby also said that another sticking point remains 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.

Republicans released a memo Tuesday outlining an alternative approach to a financial overhaul that shared many provisions of the Democrats' bill.

A big difference is on the consumer regulator. The draft suggests Republicans prefer a panel consisting mostly of regulators to create new consumer protection rules. Republicans also want new rules cracking down on the government sponsored enterprises Freddie Mac and Fannie Mae.

During his speech on the Senate floor, Dodd said that he could work with a lot of the things he saw in the Republican memo, except the rules for Freddie Mac and Fannie Mae. Dodd said new rules are needed, but said that issue is too big and complex, and needs to be tackled on its own.

-- CNN congressional producer Ted Barrett and correspondent Brianna Keillar contributed to this report.