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Dems seek GOP defectors to back financial reform

WASHINGTON - With no bipartisan deal on how to rein in Wall Street, Democrats stepped up their efforts yesterday to splinter unified Republican opposition to their sweeping regulatory overhaul.

In a move that could attract the support of at least two Republicans, Democratic Sen. Christopher Dodd, the chairman of the Senate Banking Committee, agreed to toughen his sweeping bill with rules on derivatives, despite objections from the Obama administration, according to a Democratic official familiar with the negotiations.

Derivatives are the complex securities blamed for helping to precipitate the 2008 Wall Street crisis.

The restrictions adopted by Dodd were written and approved by the Senate Agriculture Committee last week. They include a requirement that banks spin off their derivatives businesses into subsidiaries with separate sources of capital. 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.

The Agriculture Committee language had the support of Republican Sens. Charles Grassley of Iowa and Olympia Snowe of Maine. It was sponsored by committee chairwoman Blanche Lincoln (D-Ark.), who pressed Dodd to incorporate it into the broader bill.

It was unclear last night whether adding the derivatives restrictions would be enough for Snowe and Grassley to join Democrats and vote to permit the start of debate on the larger Wall Street bill.

On Friday, Senate Republican Leader Mitch McConnell blocked Democrats' efforts to bring the bill up for debate, setting up a vote today that will require 60 votes to move ahead. McConnell said yesterday that if Republicans did not strike a deal with Dodd on several aspects of the bill, all 41 Republican senators would vote to delay the start of debate.

Dodd and Sen. Richard Shelby, the top Republican on the banking committee, professed to be close to a deal during a joint appearance on NBC's "Meet the Press." But, as Shelby said, "inches sometimes are miles."

And the two lawmakers did not hold a negotiating session Sunday.

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