After a week of parliamentary motions by Republicans and political mudslinging by Democrats, the Senate has begun debate on Sen. Chris Dodd’s financial overhaul bill. Dodd (D-CT), who’s hoping to make this his swan song before retiring at the end of this session, drafted the original legislation several weeks ago with a number of provisions meant to put America’s financial system firmly under the boot of the federal government.

At first, the bill included a $50 billion bailout fund to rescue failing financial institutions, institutionalizing the “too big to fail” philosophy that has already helped to prevent a full economic recovery. The fund would have been paid for by new taxes and fees on the nation’s banks – fees that would have trickled down to consumers. Now, thanks to Republican pressure, an amendment has been added that calls for the government to shut down failed banks. The $50 billion fund will pay for liquidation.

The bill also calls for the creation of a rash of new federal agencies to further muck up an already badly regulated system, chief among them the Consumer Financial Protection Agency (CFPA). In a bill that stretches some 1,300 pages, the CFPA is outlined vaguely enough to allow it the power to regulate virtually any financial transaction, including but not limited to car loans, check-cashing companies and even department stores with layaway plans.

The Democrats hoped to cash in on public anger over Wall Street (see Goldman Sachs) and ram the bill through the Senate, but the Republicans rallied. The GOP was able to hold its caucus together and draw in Ben Nelson (D-NE) to defeat three cloture votes to move the bill to the floor. Minority Leader Mitch McConnell (R-KY) stated that if the bill was truly going to be bipartisan, then serious changes were needed.

Majority Leader Harry Reid (D-NV) stuck to his “eat-the-rich” playbook, claiming, “Republicans have made it clear whose side they’re on: Big banks on Wall Street, not middle-class families.” This idea that financial reform has to be a zero-sum game indicates that Reid and his caucus profoundly misunderstand (intentionally?) how the American financial system actually works. A sound bill must be free-market oriented, not just a punitive robbery of Wall Street.

Furthermore, the charge that it’s only Republicans who are in bed with Wall Street is pure hogwash. In fact, in the last two election cycles, political contributions from the big financial firms that Democrats are demonizing gave more money to them than to Republicans. Democrats edged out the GOP in 2006 in total dollars and received $21 million more than Republicans in 2008. Barack Obama alone received $15 million from the financial industry. This year’s cycle has trended similarly, with the Democrats besting Republicans by $8 million through March, but that’s likely to change, particularly after the very public (and very foul-mouthed) senatorial grilling that financial giant Goldman Sachs received on Tuesday.

Reid wasn’t about to let a little thing like the $500,000 he’s received from the financial sector stop him from casting Republicans as standing in the way of reform. The Republican strategy, however, was meant to force enough changes in the legislation for them to be comfortable with bringing it to the floor for debate. By Wednesday, after closed-door discussions between Dodd and Alabama Sen. Richard Shelby, the Senate Banking Committee’s ranking Republican, Republicans voted unanimously to let the bill go to the floor. They will use the debate period to attempt to shape a more common-sense bill that includes true reform rather than the pillaging of the American financial sector that Democrats desire. Good luck.