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Partisan jabs diminish a bit as Senate opens debate on legislation to regulate Wall Street

WASHINGTON (AP) — Days of high-decibel partisanship yielded to slightly more subdued accusations as the Senate lurched into action Thursday on legislation reining in Wall Street and risky investments that nearly wrecked the economy in 2008.

Within moments of the opening of debate, Sen. Richard Shelby of Alabama said he and other Republicans hoped to rewrite the White House-backed bill "so that it actually ends bailouts, protects consumers without jeopardizing our small community banks, and brings transparency to the world of derivatives without sacrificing economic growth and job creation."

It was a none-too-subtle accusation that Democrats favor taxpayer bailouts of failing banks, and Sen. Barbara Boxer of California volleyed back a few moments later.

"I knew it was false" when Republicans said it, she said. Holding up a mug of water, she added, "It is like saying this glass of water is a cup of coffee. ... And if you say it seven, eight, nine times that it is coffee someone might believe it."

No votes were taken, and none was likely before Tuesday on the legislation, expected to take two weeks or more to complete.

The House has already passed its version of the bill, and it could be months before a compromise goes to President Barack Obama for his signature.

Despite the rhetoric, Sen. Christopher Dodd, D-Conn., said there was a chance for bipartisan agreement on three major issues in dispute: setting rules covering the future failures of large financial institutions, establishing new protections for consumers and regulating risky investments known as derivatives.

"Simply put, we have no other choice but to do so. The status quo is unacceptable. We cannot leave the American people vulnerable to the present construct of our financial regulators system," he said.

While some of the differences are partisan, others are driven by ideological concerns, pressure from banks or other industries, proximity to Wall Street or concerns raised by the Obama administration or the Federal Reserve.

Some liberals favor using the bill to break up large banks, and have said they intend to seek a vote on the issue.

Both the Federal Reserve and the Treasury Department have raised concerns about a provision in the measure that would prohibit banks from participating in the trading of derivatives, the complex investments that some blame for the economy's near-collapse.

Warren Buffet, the country's best known investor, is among those urging that new controls on derivatives apply only to those of the future, meaning that the ones already in existence would not be subjected to new requirements for collateral.

The U.S. Chamber of Commerce is working to soften the consumer protection provisions Democrats included in the bill. Auto dealers that offer loans to consumers want to remain exempt from the consumer protection portion of the bill, and banks do not want states to be permitted to impose tougher regulations than the federal government does.

Democrats already have agreed to jettison a proposed $50 billion fund financed by banks to liquidate failing financial companies that are too big for bankruptcy. The administration did not support it, and Republicans claimed it would have perpetuated bailouts.

Without that fund, Republicans fear Democrats might add a bank tax sought by the administration to recoup the cost of past taxpayer-funded bailouts of banks, the auto industry, failed insurance giant AIG as well as mortgage giants Fannie Mae and Freddie Mac. Most banks have repaid the money they received, and General Motors has done so with a portion of its bailout.

The maneuvering began one day after Republicans ended a three-day blockade that prevented debate on the legislation.

Democrats forced a series of test votes earlier in the week and said Republicans were working to protect Wall Street. Republicans denied it, and said their united stand had persuaded Democrats to abandon the fund, thereby removing any threat of future bailouts.

Many Republicans have been criticized sharply by conservative voters and interest groups for their votes in favor of a bailout fund sought by former President George W. Bush in 2008, and a subsequent replenishment early last year that Bush and then-president-elect Obama requested.

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