WASHINGTON (Reuters) - With the threat looming of a midnight government shutdown, the fate of a $1.1 trillion U.S. spending bill was thrust into doubt on Thursday by Democratic objections over a provision to roll back part of the Dodd-Frank financial reform law.
Republican leaders in the House of Representatives delayed a Thursday afternoon vote on final passage to shore up support after the measure cleared a procedural hurdle by only two votes. Both liberal Democrats and conservative Republicans were urging their colleagues to oppose it.
"Leadership teams are still talking to their respective members. A vote is still planned for this afternoon," said Mike Long, a spokesman for House Majority Leader Kevin McCarthy.
With current spending authority for federal agencies expiring at midnight on Thursday, the House was also planning to pass a two-day extension to avoid a shutdown and allow more time for the Senate to consider the 1,603-page funding package, Republican aides said.
A longer, three-month extension of current spending levels was also floated by a senior congressional aide as a possible alternative plan if support for the bill wanes.
Negotiated by Republican and Democratic appropriators and leaders in both chambers, the bill looked to be cruising toward passage until full details were disclosed on Tuesday night.
Liberals, led by Senator Elizabeth Warren of Massachusetts, were livid that it included a provision that kills planned restrictions on derivatives trading by large banks, allowing them to continue trading swaps and futures in units that benefit from federal deposit insurance and Federal Reserve loans.
The Obama administration and Democratic lawmakers also were worried about setting a precedent that emboldens Republicans to cram more Dodd-Frank rollbacks into must-pass legislation, especially when Republicans have control over both chambers of Congress next year.
The Dodd-Frank regulatory overhaul was enacted in the wake of a financial crisis triggered partly by the collapse of complex mortgage derivatives.
"Heaven knows what the Republicans will try to jam down our throats," Democratic Representative Elijah Cummings told reporters.
But the White House appeared to put a higher priority on government funding. It said in a statement that President Barack Obama would still sign the measure if it passed, even though he objects to the derivatives rollback and some other provisions.
"We believe that this compromise proposal merits bipartisan support on Capitol Hill, and hopefully will arrive on the president's desk in the next few days, and if it does, he will sign it," White House spokesman Josh Earnest told reporters.
The measure also faces opposition from conservative Republicans, who say it fails to do anything to stop Obama's immigration order which they view as "amnesty" for illegal immigrants. Sixteen Republicans voted against it in the procedural vote, and more may say no to final passage.
Some Democrats also demanded the removal of a provision that allows a massive increase in individual contributions to national political parties for federal elections, potentially up to $777,600 a year.
Democratic support is seen as critical to passage of the spending bill in the House, as Republican aides and lawmakers say it is unlikely their party would be able to muster enough votes for passage on its own.
The spending bill would keep most federal agencies funded through September 2015, except for the Department of Homeland Security (DHS), which would get an extension only through Feb. 27.
The plan is intended to give Republicans leverage over DHS next year, when they will have a stronger majority and take control of the Senate. The Republicans intend to deny funding to the agency for implementation of Obama's order allowing millions of undocumented immigrants to stay and work in the United States.
(Additional reporting by Richard Cowan, Susan Cornwell and Amanda Becker; Editing by John Whitesides and Tom Brown)
