Influential Republican Senator Judd Gregg said on Tuesday he expects the Senate to eventually pass a financial reform bill as Democrats moved to force a series of votes to try to open debate on the measure.
Seeking to cast Republicans as Wall Street's allies, Democrats plan votes that will test Republicans' resolve to stay united in blocking debate of a legislative crackdown on the deeply unpopular financial services sector.
In the end, even as Republicans hold out for further negotiations to reshape the 1,400-page bill along more moderate lines, it is likely to pass, Gregg said.
It's going to get a very large vote from people who want to send a message that they're against Wall Street and for populism, he said at the Reuters Global Financial Regulation Summit in Washington.
On possible Republican defections in the days ahead, he said, Oh yes, I think there will be more than one or two in the end ... I will not be one of them if it's structured anywhere near what is presently being considered.
Globally, financial markets see the debate on U.S. regulation as crucial to how banks will be valued in future, how much they may have to raise their capital and how much risk investors will be able to put on the table in future.
Signs -- most notably a suit against Goldman Sachs -- that the crackdown in the United States would target financial institutions, drove stock markets worldwide lower earlier this month. Markets were preoccupied with debt troubles in Europe on Tuesday, putting aside the regulation battle.
President Barack Obama and the Democrats want to tighten the rules on banks and capital markets to prevent a repeat of the 2008-09 financial crisis, which tipped the economy into a severe recession and unleashed reform efforts worldwide.
Many Republicans say they see a need for reform, but oppose the Democrats' bill as an overreach by government.
The House of Representatives approved a bill in December that embraced many reform proposals made in mid-2009 by Obama. Anything the Senate produces would have to be merged with the House bill. Analysts have said that could happen by mid-year.
Republicans have said the bill goes too far in regulating derivatives, in separating consumer protection from bank supervision, and in setting up a $50-billion fund to finance the orderly liquidation of large financial firms in distress.
At the moment, Gregg said, Republicans are unanimously opposed to moving forward on this bill unless we get to negotiate language. I think that's a legitimate position and hopefully we'll hold that position until we get to negotiate reasonable language.
Senate Democratic Leader Harry Reid plans a procedural vote for 4:30 p.m. EDT (2030 GMT) on Tuesday. If Republicans again block formal debate on the bill, as they did on Monday, Democrats will hold another vote on Wednesday.
Reid accused Republicans of delaying tactics and trying to keep negotiations behind closed doors. We want to bring our bill to the floor so we can discuss it, debate it, amend it and improve it. We want to do it out in the open, he said.
The reform bill stumbled on Monday in its first test vote in the Senate, after months of bipartisan debate and more than two years since the collapse of Wall Street giant Bear Stearns ushered in the worst banking debacle since the 1930s.
Republicans unanimously voted to block debate on the bill from starting. They were joined by Democratic Senator Ben Nelson.
MENENDEZ: VOTES BRING PRESSURE
Democratic Senator Robert Menendez said at a news conference that the repeated procedural votes this week will focus the public on the issue and make it more difficult for Republicans to resist an initiative popular with voters.
As the spotlight gets riveted on Wall Street reform ... that will create pressure, said Menendez, who, along with Gregg, is a member of the Senate Banking Committee.
At the end of the day, I think this is political dynamite. Republicans have lit the match and they have time to put it out before it explodes, he said.
He added that Republicans say they're for reform in public, but behind closed doors they continue to strategize with Wall Street about how to kill this legislation.
The Senate bill would set up a new orderly liquidation process for dismantling large financial firms in distress; create a new financial consumer protection watchdog; impose regulations on the over-the-counter derivatives markets; curb risky trading by banks; force hedge funds to register with the government; and crack down on debt securitization.
(Additional reporting by Andy Sullivan; editing by Patrick Graham)