With November congressional elections looming, Republicans vowed to once again block debate of the most ambitious rewrite of Wall Street rules since the Great Depression as they pushed their first counterproposal behind the scenes.
A procedural vote to test both sides' resolve was scheduled for 12:20 p.m. (1620 GMT).
The Republican counterproposal is "extremely similar" to the Democratic bill and shows the two sides are not far apart, investment firm Concept Capital said in a research note.
Financial markets are watching the battle in the Senate closely for signs of how strong the crackdown on banking and dealing practices will be, and what that may mean for banks' capital and valuations.
Worried about losses in this year's elections, Democrats are keen to take advantage of widespread anger at Wall Street, perhaps the only address more unpopular than Capitol Hill. Many expect a bill will eventually pass.
One day after he endured a marathon grilling by a Senate panel, Goldman Sachs Inc. Chief Executive Lloyd Blankfein said he had not thought about resigning amid accusations the firm helped inflate the housing bubble and then made billions off the market's collapse.
Democrats hope the government's fraud case against Goldman will help them pass the reform bill. Republicans seized on Blankfein's apparent support of the rewrite to bolster their case against it.
"The most conspicuous supporter of this bill is the chairman of Goldman Sachs," Senate Majority Leader Mitch McConnell said on the Senate floor.
Republican Senator Richard Shelby said on Tuesday that Democrats had incorporated some Republican ideas in the bill, but did not specify which ones. A proposed consumer-protection agency remains the biggest stumbling block, he said.
The 1,558-page Democratic bill would set up a new "orderly liquidation" process for dismantling large firms in distress and create a new consumer-protection watchdog.
It would impose regulations on over-the-counter derivatives markets, curb risky trading by banks, force hedge funds to register with the government and crack down on debt securitization.
Any bill that passes the Senate would have to be reconciled with a version that cleared the House of Representatives in December. Analysts say that could happen by mid-year.
Republicans see a need for reform, but say the Democrats' bill reaches too far. They worry the tough consumer protection provisions could burden small business with costly red tape.
The Republican proposal, obtained by Reuters, is the first time the minority party in the Senate has set down its goals on paper during months of closed-door negotiations. It would set up a consumer-protection council, rather than the consumer-protection bureau envisioned by Democrats.
Republicans would also set up a process to wind down "too big to fail" firms, but without the $50 billion fund proposed by Democrats.
Republicans also want to restrict the Federal Reserve's emergency-lending authority, while also allowing national bank regulators to continue to preempt state laws.
In votes on Monday and Tuesday, Democrats fell short of the 60 votes needed to advance bills in the 100-seat chamber.
One key Republican moderate, Senator Susan Collins, said she again planned to vote against taking up the Democratic bill. "We still don't have an agreement on going to the floor so I will (vote against it)," Collins said on NBC's "Today" show.
"But let me emphasize, Republicans are trying to strengthen the financial reform bill." Democrats have blasted Republicans for stalling on a measure that aims to prevent a repeat of the 2008-2009 financial crisis that led to a deep recession.
