WASHINGTON – Republicans are voting "no" so that some of them can get to "yes" on tightening the reins on Wall Street.
Outnumbered by Democrats, Senate Republicans have held together for two days, twice blocking the start of debate on new financial regulations in hopes of negotiating changes they would be unable to win through amendments on the Senate floor.
In the protracted fight, Republicans also have tried to score political points, casting the Democrats' proposal as a perpetuation of taxpayer bailouts — a hot-button issue with the public — and accusing Democrats of writing an overambitious bill that will hurt small businesses.
Democrats scheduled another vote for Wednesday to sustain pressure on Republicans in the expectation that some incremental changes to the pending bill ultimately would force several Republicans to relent and back the legislation.
Few doubt that the Senate will pass a broad overhaul of financial regulations in an attempt to prevent a recurrence of the crisis that nearly caused a Wall Street collapse in 2008. But Republicans want their imprint on the bill. And bankers appear to want them to succeed as well.
If campaign contributions are any barometer, large Wall Street institutions approve of what Senate Republicans have been doing to alter the regulatory regime envisioned by the Obama administration and its Democratic allies.
The political action committee of Bank of America, for instance, has contributed 57 percent of its $336,000 in 2009-10 donations to Republicans, according to the Center for Responsive Politics. In the 2007-08 cycle, 53 percent of the bank's PAC contributions went to Democrats.
A spot check of contributions by The Associated Press showed that Goldman Sachs' PAC, which contributed predominantly to Democrats between 2007 and 2009, shifted to Republicans in March, contributing $167,500 to Republican members of Congress and their political committees and $117,000 to Democrats. Similar patterns emerged for JPMorgan Chase and Morgan Stanley, whose PACs both shifted to Republicans last month.
Testifying before a Senate investigative subcommittee on Tuesday, Goldman CEO Lloyd Blankfein said he generally supported the pending Democratic bill but said "there are details of it that I think I'm less sure of."
Senate Banking Committee Chairman Christopher Dodd, D-Conn., and the committee's top Republican, Alabama Sen. Richard Shelby, have been conducting on-and-off negotiations for months but have not arrived at a compromise. Dodd incorporated some Republican proposals into his bill and appeared ready to accept new alterations that addressed Republican claims that the bill could still result in government bailouts.
But Shelby also was seeking changes in the bill's consumer protection provisions — a key feature and a priority for President Barack Obama. Dodd on Tuesday said that if Republicans wanted to change his consumer measures, they should do so by amendment in the Senate.
"We're not going to write this whole bill between two senators," Dodd said.
The Republican tactics in the Senate carry risks for the party. The public is angry at Wall Street, and Democrats have taken the opportunity to charge Republicans with doing Wall Street's bidding.
Under attack for twice voting to stall the pending regulatory bill, Republicans on Tuesday floated a 20-page summary of a GOP alternative to Dodd's measure.
The Republican plan would prohibit the use of taxpayer funds to bail out failing financial giants in the future and impose federal regulation on many but not all trades of complex investments known as derivatives. Unlike the Democrats' bill, large banks would not have to help pay for the failure of their peers. It also calls for consumer protections that are narrower than what Democrats and the White House seek, and it would place restrictions of financial assistance to mortgage giants Fannie Mae and Freddie Mac.
"Everybody is going to want to be for a solution," said Sen. John Cornyn, R-Texas, "so it offers a potential alternative solution instead of just voting no against the Dodd bill."
Republicans also were counting on the public to forget the Republican stalling tactics.
"You know, what happens on Monday or Tuesday versus what happens later is something largely lost on the general public," Senate Republican leader Mitch McConnell said.
But there were signs that Republicans would only stick with the strategy for so long.
Sen. George Voinovich, R-Ohio, said he would vote to let the bill advance to the Senate floor if bipartisan talks were no longer progressing.
"I have an idea of how much time it takes to cut a deal," he said. "If that's not possible, then we go on."
WASHINGTON – The CEO of Goldman Sachs testily defended his company's ethics and business practices during the nation's financial crisis on Tuesday, saying customers who bought securities from the Wall Street giant came looking for risk "and that's what they got."
"Unfortunately, the housing market went south very quickly," Lloyd Blankfein told skeptical senators on an investigatory panel. "So people lost money in it."
He was the final witness in a daylong hearing on Goldman Sachs' behavior, which resulted in a government civil fraud charge earlier this month. Five present and two former Goldman officials held their ground in hours of contentious testimony, unflinchingly defending their conduct and denying that the Wall Street investment bank helped cause the near-meltdown of the nation's financial system.
While the famous firm fought for its reputation, senators said the company's actions leading up to the financial crisis clearly demonstrated a need for stronger regulation, and Democrats hoped the hearing would build support for legislation now before the Senate. Republicans have so far succeeded in blocking debate, and did again on Tuesday. But more test votes are expected, and GOP lawmakers floated a partial alternative they said could lead to election-year compromise on an issue that commands strong public support.
If the two parties were far apart on terms of a regulation bill, they united in criticizing Goldman in the highly charged committee room in a direct confrontation between Wall Street and Congress.
Sen. Carl Levin, D-Mich., the panel's chairman cited a "fundamental conflict" in Goldman's selling securities and then betting against the same securities — and not telling the buyers.
"They're buying something from you, and you are betting against it. And you want people to trust you. I wouldn't trust you," Levin told Blankfein.
Blankfein denied such a conflict. "We do hundreds of thousands, if not millions of transactions a day, as a market maker," Blankfein said, noting that behind every transaction there was a buyer and a seller, creating both winners and losers.
ATHENS – Greece was pushed to the brink of a financial abyss and started dragging another eurozone country — Portugal — down with it Tuesday, fueling fears of a continent-wide debt meltdown.
Stocks around the world tanked when ratings agency Standard & Poor's downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece's financial contagion is spreading.
Major European exchanges fell more than 2.5 percent, and on Wall Street, the Dow Jones industrial average finished down more than 200 points. The euro slid more than 1 percent to nearly an eight-month low.
"We have the makings of a market crisis here," said Neil Mackinnon, global macro strategist at VTB Capital.
Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a euro45 billion rescue package, but it hasn't worked.
Standard & Poor's warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone.
One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral — including Europe's fifth-largest, Spain. Can Germany, Europe's effective paymaster, continue to bail out the weaker members of the eurozone?
The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.
It has also disrupted cooperation between eurozone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.
Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.
Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money to make the euro8.5 billion bond payments due on May 19.
Even if it does, Greece faces years of austerity with living standards sharply reduced. Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.
Junk status sinks Greece's hopes even deeper. Losing investment-grade status for its bonds means that Greece will have to pay higher costs to borrow if it taps debt markets again, and increases the chances that existing debt will have to be restructured.
"The latest developments mean that the chances of Greece solving this situation without restructuring its debts are now dim," said Diego Iscaro, senior economist at IHS Global Insight.
German Chancellor Angela Merkel reiterated her position that Greece should first conclude the current negotiations with the IMF and the European Union about austerity measures for the coming years before receiving the international loan package.
Speaking at an election rally Tuesday afternoon, Merkel said it is appropriate to tell Greeks, "You have to economize, you have to become fair, you have to be honest; if not, nobody can help you," according to the German news agency DAPD.
A government spokesman said Tuesday evening he could not tell if Merkel was at that point aware of the latest downgrade. He declined to be named in line with government policy.
The FTSE 100 index of leading British shares closed down 2.6 percent, Germany's DAX slid 2.7 percent and the French CAC-40 in France ended 3.8 percent lower.
Greek and Portuguese stocks were pounded — down 6.7 percent and 5.4 percent, respectively — while their market borrowing costs went through the roof. The interest rate for Greek two-year bonds jumped to a massive 18 percent.
The interest rate gap, or spread, between Portugese and benchmark German 10-year bonds rose about half a percentage point Tuesday to reach its highest point since the euro came into circulation. The higher the gap, the less confidence in Portugal; its bonds on Tuesday had an interest rate 5.86 percentage points higher than German bonds.
Both the Portugese and Greek governments have imposed budget cutbacks against political resistance from unions at home. Markets have been skeptical that they can push through enough cuts, given political resistance, to put their finances in order.
Both governments responded with alarm at the downgrades.
"This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Portugese Finance Minister Fernando Teixeira dos Santos said.
Greek Finance Minister George Papaconstantinou said the downgrade "does not reflect the real state of our economy, nor the fiscal situation, nor the ongoing negotiations which have the very realistic propects that they will be completed successfully in the next few days."
Papaconstantinou said Greece will pull through.
"One wishes that Europe had acted a little differently. Three and four months ago we were saying that the mechanism must be ready and it must be detailed, that the markets must know what exactly is going. Unfortunately, for a series of political reasons, we are down to the wire," he said.
The crisis has highlighted the eurozone's inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted, and EU officials are talking about ways to strengthen them.
AP Business Writer Pan Pylas contributed from London.