By Renuka Rayasam
May 25, 2010

With the financial reform debate heating up on the Senate floor, it might appear as if lawmakers are headed for a dramatic, health care style showdown. Yet despite the political grandstanding, financial reform actually has broad bipartisan support.

In the nearly 20 months since Congress approved $700 billion to buoy banks on the brink of collapse, public and political ire against Wall Street has only intensified. Voters want to see the financial sector punished. Lawmakers of both parties understand that tapping into that anger will only help them come November.

Key Senators of both parties early on agreed to the general outline of financial reform: consumer protection and resolving large bank failures are in and remaking housing giants Fannie Mae and Freddie Mac are out for now. (The bill quickly passed the House on a straightforward party line vote.)

So why then has financial reform legislation hit so many Senate roadblocks? That is partly because the bill itself is as complex as many of the institutions it is working to reign in. Stretching to more than a 1,300 pages, the reform touches on every aspect of the economy ranging from auto dealer loans to complex financial instruments. Senators are trying to figure out how to support the bill without alienating key constituencies or donors.

As a result, Senate disputes aren’t falling neatly along party lines. Last year, when talks broke down between Senate Banking Committee leaders, Republican Richard Shelby (Alabama) and Democrat Christopher Dodd (Connecticut), junior Republican Senator Bob Corker (Tennessee) jumped in to negotiate with the Democrats. When those talks failed, Shelby and Dodd began working together again.

Then just recently Democratic Senator Ben Nelson (Nebraska) broke with his own party to vote with Republicans against bringing the bill the full floor, presumably worried about a provision that would affect Nebraska investor, Warren Buffett. Now some Democrats are questioning whether a deal on derivatives, struck by their own party’s Blanche Lincoln (Arkansas), might be too tough.

Still financial reform will make it through the Senate obstacle course and land on the President’s desk this summer. If there’s one thing that can unite Republicans and Democrats now it’s a common enemy: banks, which have become the universal villains in the country’s current recession.