US Senate breaks logjam on Wall Street overhaul

After months of closed-door talks, and three days of bitter partisan gridlock, lawmakers scheduled the start of what were expected to be two weeks of debate on the popular bill for 12:15 pm (1615 GMT) on Thursday.

"The American people have waited long enough for their leaders to get to work cleaning up Wall Street," said Democratic Senate Majority Leader Harry Reid. "It is time to move this debate from the sidelines to the playing field."

The move came after Republicans abandoned their lockstep opposition to starting debate on the bill, amid signs US public anger at big banks blamed for the 2008 global economic meltdown will shape November mid-term elections.

The measure enjoys the support of nearly two-thirds of the US public, struggling with an economy that has yet to heal from the collapse, with stubbornly high US unemployment, a struggling housing sector and other woes.

The bill aims to ban big firms from tapping billions of dollars in government aid when their failure threatens the broader economy and create, for the first time, an agency to protect consumers from shady financial dealings.

It also looks to regulate trade in derivatives, complex financial instruments often used by firms to smooth out volatile commodity prices but blamed for warping the market and fanning speculative flames.

Obama cheered news of the breakthrough as he headed home from a two-day campaign-style trip to midwestern states badly hit by the economic crisis.

"I am very pleased that the United States Senate has decided to proceed to the financial regulatory bill by unanimous consent," Obama told reporters aboard Air Force One.

"It is the right thing to do.

The president declined to comment on the grilling faced by Goldman Sachs executives on Capitol Hill on Tuesday, citing the current investigation into the firm by the Securities and Exchange Commission.

But he spoke about some of the more exotic instruments pieced together by the finance industry, after bundles of bad loans traded on the markets were partly blamed for triggering the financial crisis.

"I will say that I think most Americans would say that some of the behavior generally on Wall Street, even if it's legal, doesn't seem to serve much of an economic purpose and puts, as we've discovered, the entire economy at risk."

The logjam broke after Senate Banking Committee Chairman Chris Dodd, a Democrat, and the panel's top Republican, Senator Richard Shelby, agreed on a compromise regarding how to handle failing firms whose collapse threatens the US economy, lawmakers said.

But they were unable to reach an agreement on derivatives trading nor on the new consumer protection agency.

"I cannot agree to his desire to weaken consumer protections given the enormous abuses we have seen," said Dodd, stressing: "It is time for this debate to begin. And it must be a serious, vigorous debate."

"This massive new bureaucracy would have unchecked authority to regulate whatever it wants, whenever it wants, however it wants," Shelby warned.

The breakthrough was merely one step in a long and uncertain legislative journey, with opportunities for Republicans to delay votes on amendments and final passage, which requires a simple majority.

Upon clearing that final hurdle, the Senate bill will need to be merged with a rival version passed last year by the House of Representatives in order to send a compromise measure to Obama to sign into law.

The Senate logjam broke after Democrats threatened to keep the chamber in session overnight to highlight, and weaken, Republican opposition to the popular bill.

That came after Republicans blocked a motion to start debate on the measure for the third straight day, citing progress in the Dodd-Shelby discussions.

A key centrist Republican ardently courted by Democrats, Senator Olympia Snowe, said she looked forward for debate to start but warned "we have a ways to go in the process. We want to improve it."

Democrats and the White House have been eager to portray Republicans as in the pocket of Wall Street, while Republicans say they want tough new rules but that the bill as currently crafted is not ready and must be changed.

The president's allies had also sought to hang fraud charges against investment giant Goldman Sachs around Republicans' necks after a tough grilling of Goldman executives by a key Senate panel on Tuesday.

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