Reuters | The U.S. Senate voted Thursday to end debate on the biggest overhaul of
financial regulation since the 1930s, allowing a final vote on the bill
later on Thursday or on Friday.

The legislation is one of President Barack Obama’s top domestic
priorities. If passed, it would mean far-reaching changes for the
banking industry affecting profits, banks’ ability to grow and to take
on risk.

The vote to close off debate was 60-40, and the Senate could vote on
the bill’s passage as soon as Thursday, two Democratic Senate aides
said.

Republicans would have to agree to that timetable. A Republican aide said no time had been set for a final vote, but it would likely come before Friday evening.

The banking industry would benefit if the bill were approved sooner rather than later, analysts said.

Most of the scores of possible amendments still under consideration would further threaten financial industry profits already under pressure from key elements of the legislation.

Senators from both parties are eager to look tough on Wall Street ahead of November’s congressional elections.

On Wall Street the Dow Jones industrial average was off 2.2 percent as a Senate panel investigated the causes of the market’s sell-off on May 6. Barney Frank, the Democratic head of a key House committee, told CNBC it is important to get financial reform approved to ease market uncertainty. He said Obama could sign a bill into law well before July 4.

LINKED AMENDMENTS EYED

The Obama administration said it supports an amendment, offered by Democrats Jeff Merkley and Carl Levin to the overall Senate bill that would tighten the proposed “Volcker rule” on curbing risky proprietary trading by banks.

The rule was first proposed in January by Obama and White House economic adviser Paul Volcker.

But an administration official said the Merkley-Levin amendment should not pass at the price of approving another amendment from Republican Sam Brownback on car loans.

Brownback wants to exempt car dealers from the oversight of a new financial consumer watchdog. The Pentagon has said it opposes such a move because car dealers around military bases sometimes target service members with unfair car loans.

In a procedural twist, the Merkley-Levin and Brownback measures’ fates were linked because Democrats kept the Merkley-Levin measure alive this week by tying it to Brownback’s amendment. Analysts said that meant both might pass.

The administration official said, “We support the Merkley-Levin amendment, but we must not sacrifice protections for American families against unscrupulous auto lending practices to pass Merkley-Levin as attached to the Brownback amendment.”

The official said the Dodd bill already provides strong protection against excessive risk-taking by banks.

Bank lobbyists have worked for months to weaken the Senate bill with little success. They were refocusing on prospects for watering it down in a House-Senate conference after Senate passage. The bill, if approved, would have to be reconciled with one passed by the House of Representatives in December.

LINCOLN AMENDMENT EYED

Another dispute still unsettled was a provision in the bill from Democratic Senator Blanche Lincoln that would force banks to spin off lucrative swap trading desks into affiliates. Major financial groups such as JPMorgan Chase, Bank of America , and Goldman Sachs could be hit hard by such a requirement, analysts said.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, raised concerns. She said she hopes Congress will “really think hard” about whether to force U.S. banks to spin off their swap trading desks. It could increase, not decrease, risk.”

FBR Capital Markets policy analyst Paul Miller said, “We are still hearing that the requirement that banks spin off their swaps desks will not make it into the final bill.”

Two Democrats who withheld their support for wrapping up debate on the bill on Wednesday did so again on Thursday.

Senator Russ Feingold, one of the chamber’s most liberal members, did not change his position. Nor did Maria Cantwell, who wants tighter regulation of derivatives.

Cantwell “may be willing to switch her vote if she can get consideration of an amendment that would require all standardized swaps to be cleared,” Miller said.

Republican Scott Brown was the only lawmaker to switch his vote after meeting with Senate Democratic Leader Harry Reid on Thursday morning.

(Additional reporting by Karey Wutkowski, Thomas Ferraro, David Lawder and Patricia Zengerle; Editing by Kenneth Barry)