Democrats chip away at GOP on financial reform

WASHINGTON (Reuters) - To get financial reform legislation through the U.S. Senate Democrats need to peel away just one Republican to support their sweeping bill.

To improve their odds, they are courting a handful of moderate Republicans, some of whom face reelection challenges, and some from states hit hard by recession and foreclosures, according to Senate aides, analysts and lobbyists.

Democrats want reforms to tighten bank and capital market regulation to prevent a repeat of the 2007-2009 financial crisis that tipped the economy into a deep recession.

Most Republicans say the reforms represent a costly over-reach of government. But some have sought compromise on reforms to prevent future debacles like the Bush administration’s 2008 bailout of AIG and the Lehman Brothers bankruptcy.

At the top of the Democrats’ target list are Maine’s two Republican senators -- Olympia Snowe and Susan Collins. Neither faces reelection in this cycle, but both are moderates who can tip the balance.

Also in the Democrats’ sights are Tennessee’s Bob Corker and New Hampshire’s Judd Gregg, members of the Senate Banking Committee who have worked for bipartisan compromise. Gregg is retiring; Corker is not yet up for reelection.

George Voinovich of Ohio, which was hammered by the 2007-2009 housing slump and recession, is also on the Democrats’ list. He is retiring, as well.

Newly elected Massachusetts Senator Scott Brown, who supported a Democratic jobs bill in February, is also seen as a possible financial reform backer.

The big prize for Democrats would be Richard Shelby of Alabama, the top Republican on the banking committee. If his support can be won for the bill, its passage would be assured.

Shelby and banking committee Chairman Christopher Dodd, the bill’s primary author, are still trying to work out a bipartisan compromise. Aides said it was possible.

If a deal cannot be struck, aides said that Dodd is prepared to bring a Democratic bill to the floor.

Senate Democratic Leader Harry Reid said he hopes to bring Dodd’s 1,336-page bill, supported by President Barack Obama, to the Senate floor next week. That schedule is likely to slip pending finalization of derivatives reform proposals.

The bill is firmly opposed by the Republican Senate leadership, along with lobbyists for large banks and Wall Street who have worked for months to weaken and block reforms.

Analysts said Republicans leaders could have trouble holding a united front as lawmakers look toward November elections. Bankers are deeply unpopular in the polls. Senators may be reluctant to be seen as holding hands with Wall Street.

If just one Republicans bolts from the ranks of the opposition, Democrats will be able to overcome procedural roadblocks Republicans are likely to put in front of the bill.

“The next several weeks will be crucial in determining if Republicans can remain united and block the bill, or if Democrats can be successful in garnering the one vote needed to pass in the Senate,” said Brian Gardner, policy analyst at investment firm Keefe Bruyette & Woods.

Democrats control 59 votes in the 100-member Senate. Sixty are needed to overcome procedural roadblocks that were once used only occasionally in the chamber, but which Republicans now routinely erect in front of major Democratic initiatives.

Reporting by Kevin Drawbaugh; Editing by Andrew Hay