Republican lawmakers stuck together Monday in preventing a massive financial regulatory bill from proceeding in the Senate, despite efforts by Democrats to portray the GOP as supporters of Wall Street -- not Main Street.
In a key test vote Monday evening on bill, all Republican senators -- and one Democrat -- voted to block floor debate on the legislation, sending both sides back to the negotiating table.
Sen. Ben Nelson, D-Neb., was the sole Democrat to break ranks and vote against the procedural measure to advance the legislation. He said later that he simply hadn't seen the bill yet and, therefore, couldn't vote to advance it. All 41 Republicans voted no, including Sen. Oylmpia Snowe, R-Maine, who had been seen as a potential defector.
Banking Committee Chairman Chris Dodd, D-Conn, has been negotiation with ranking Republican on the committee, Sen. Richard Shelby of Alabama, for weeks in search of a compromise. They were are said to be close, but as of Monday night, not close enough.
President Obama said shortly after Monday's vote that he was "deeply disappointed" that Senate Republicans voted to block debate on the bill.
"Some of these senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether," Obama said in a written statement. "But the American people can’t afford that."
The vote came after Senate Majority Leader Harry Reid tried to shame Republicans into supporting a sweeping Wall Street regulation package.
Reid was pushing for a vote to start debate on the financial regulatory reform package, even though Republican and Democratic negotiators have not yet reached a deal.
Republicans, including Shelby, had said there was room for a deal on the issue but that one was unlikely to emerge by the time Reid tried to call for a cloture vote like the one held Monday night. Reid is pushing forward anyway.
"Democrats have the nerve in this debate to say that we're the ones who are being dishonest," Minority Leader Mitch McConnell, R-Ky., said after the vote. "All of us want to deliver a reform bill that will tighten the screws on Wall Street, but we're not going to be rushed into another massive bill based on the assurances of our friends on the other side."
A cloture vote takes 60 senators to pass -- Democrats have 59 senators in their caucus and would need one Republican to cross over.
"As far as I can tell, the only thing Republicans stand for is standing together," Reid said on the Senate floor Monday afternoon. "But a party that stands with Wall Street is a party that stands against families and against fairness."
Polls show Americans are moving toward supporting tighter controls on financial institutions, and freshman Democrats have told leadership they want this kind of confrontation with Republicans.
A senior Senate leadership aide told Fox News that Democrats will continue to ask for the approval of all members to start debate on the package Monday as a way to further highlight what they say is Republican obstructionism.
The legislation is the most sweeping effort to rein in financial institutions since the Great Depression. Aimed at avoiding a recurrence of the near collapse of the financial system in 2008, it would create a mechanism for liquidating large firms that get into trouble, set up a council to detect systemwide financial threats and establish a consumer protection agency to police lending.
The legislation also would require derivatives, blamed for helping precipitate the meltdown, to be traded in open exchanges.
The House already passed its version of the legislation.
Senate Republican Leader Mitch McConnell on Friday blocked Democrats' efforts to bring the bill up for debate, setting up a vote Monday that will require 60 votes to move ahead. McConnell and Shelby said Sunday that without a deal with Dodd, all 41 Republican senators would vote to stall the start of debate.
But unlike the health care debate, public sentiment was not working in favor of Republicans.
On Sunday, Dodd agreed to toughen his overarching bill with stronger rules on derivatives, including one that had drawn objections from the Obama administration, according to a Democratic official familiar with the negotiations. Dodd entered into a tentative deal with Agriculture Committee Chairwoman Blanche Lincoln, D-Ark., to incorporate her committee's derivatives provisions into the broader regulatory legislation. At least two Republicans -- Sens. Charles Grassley of Iowa and Olympia Snowe of Maine -- are on record supporting Lincoln's derivatives package.
Derivatives are the complex securities blamed for helping precipitate the 2008 Wall Street crisis.
One of the most sweeping of Lincoln's restrictions would require banks to spin off their derivatives business into subsidiaries with a separate source of capital. Large banks fiercely opposed the provision. The Obama administration has called for banks to end trading in speculative securities but not to jettison operations that create derivatives markets for clients.
In yet another attempt to attract Republicans, Democrats appeared willing to jettison from the bill a $50 billion fund -- financed by large banks -- that would have been used to liquidate failing firms once considered "too big to fail." The fund has been one of the main targets of GOP criticism.
Democrats said the time had come to move on with the bill.
"Are we going to start the debate or are we going to shut it down and continue negotiating, negotiating, negotiating?" Sen. Sherrod Brown, D-Ohio, asked on ABC's "This Week" Sunday.
For now, Republicans are using the only leverage they have -- the threat of 41 unified votes -- to seek a bigger GOP imprint on the bill.
The impasse reflects differences over how to contain large, interconnected financial firms and how to liquidate them when they fail. But Democrats and Republicans also differed on how to protect consumers and how to set limits on previously unregulated exotic instruments such as derivatives.
Dodd has already incorporated a number of Republican ideas into his version of the bill following negotiations with Shelby and Republican Sen. Bob Corker of Tennessee. Democrats, particularly liberals, have become increasingly worried that a compromise with Shelby will limit their ability to amend the bill during floor debate.
The Associated Press contributed to this report.