What shifted the momentum on Wall Street reform?

WHAT SHIFTED THE MOMENTUM ON WALL STREET REFORM?…. After some unpleasant chest-pounding last week, the fate of Wall Street reform looked shaky as recently as Monday afternoon. Yesterday, however, there was evidence of real progress, and today Sen. Richard Shelby (R-Ala.), a leading negotiator on the bill, acknowledged, “We’re very close to a deal and there will be a substantial number of Republicans that go along with it.”

So, what’s behind all this progress? Brian Beutler and Christina Bellantoni explained that Republican senators weren’t prepared to walk off a cliff on this one.

Key Republicans, sincere about passing new rules for Wall Street, but intimidated by the notion of blocking financial regulatory reform, let it be known to their leadership that, at some point, they would side with Democrats to break a filibuster. Maybe not on round one, or even round two. But eventually.

“Folks on our side of the aisle want a bill,” Sen. Bob Corker (R-TN) told me and a few other reporters Monday night. “I know that. I just [had a] discussion with some of our leadership on the floor. You know, we want a bill.”

Sen. Olympia Snowe (R-ME) made it equally clear: if top-level negotiations broke down, she and other members would find a solution. “I think it’s important to continue between the two principals on the committee, because that’s where it’s likely to happen,” Snowe told reporters yesterday afternoon. “But if not then we’ll take things as they come. We’ll take the next step.”

This afternoon, entering a Republican caucus meeting, the Republican Deputy Whip John Thune candidly acknowledged that the politics just aren’t playing out for the GOP, and that members don’t want to take a tough vote against regulating Wall Street.

In other words, Dems’ expectations were actually correct on this one.

Evidence that the GOP is “softening its opposition” to financial regulatory reform is apparent in more than just rhetoric and renewed negotiations.

The Senate Agriculture Committee voted this afternoon, for example, to approve Sen. Blanche Lincoln’s (D-Ark.) aggressive measure to tighten regulation of derivatives trading. In an unexpected development, Sen. Chuck Grassley (R-Iowa) voted with Democrats in support of the proposal, further evidence that the GOP is no longer marching in lock-step when it comes to bringing new safeguards to Wall Street.