Democrats return to drawing board on Wall St bill

Democrats return to drawing board on Wall St bill

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By Rachelle Younglai and Kevin Drawbaugh

WASHINGTON (Reuters) - U.S. Democrats on Tuesday considered stripping out a controversial tax from their landmark financial-reform bill in order to win the swing votes needed to pass it in Congress.

With crucial Republican moderates threatening to withdraw their support for the bill, Democrats were weighing alternative ways to fund the most sweeping rewrite of the Wall Street rulebook since the 1930s, multiple sources said.

Democrats planned to reopen negotiations on the bill at 2 p.m. (1800 GMT), sources said.

Until Sunday, the bill had been expected to pass both chambers of Congress and be signed into law by President Barack Obama by July 4.

But Democrats are now two votes short of the 60 needed to clear a Republican procedural hurdle in the Senate. Democratic Senator Robert Byrd died on Monday morning, depriving his party of a needed vote, and Republican Senator Scott Brown said on Tuesday he would withdraw his support unless Democrats strip out $19 billion in taxes that would apply to large financial institutions.

The tax was added during a final all-night negotiating session last week.

"It is especially troubling that this provision was inserted in the conference report in the dead of night without hearings or economic analysis," Brown wrote in a letter to the Democrats who are handling the bill. "This new provision takes real money away from the economy, making it unavailable for lending on Main Street, and gives it to Washington."

Other moderate Republican senators who have previously supported the bill have also expressed reservations over the new tax.

For a graphic on the Senate vote: FinReg cloture, please see: http://link.reuters.com/hef64m (Additional reporting by Kim Dixon, Corbett Daly and Andy Sullivan; writing by Andy Sullivan; editing by Dan Grebler)