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Senate Republican leaders are girding for battle on financial regulatory reform and using the recess to develop a legislative and political strategy capable of uniting the minority and forcing the Democrats to make a deal.

Negotiations over the legislation are fluid and the direction of the Republicans remains unclear. But Minority Leader Mitch McConnell (R-Ky.) and his team are exploring both opposition and bipartisan approaches to President Barack Obama’s plans for overhauling regulations governing Wall Street as they take the temperature of their Conference and look to end months of internal drift.

“We’re spending the recess preparing for the Senate’s return and will be engaging in a more public way the first week back,” a Senate Republican leadership aide said.

A financial regulatory reform package was reported out of the Senate Banking, Housing and Urban Affairs Committee last month, in the shadow of the caustic fight over health care. The leading Democratic and Republican negotiators — Banking Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) — were still trying to reach a bipartisan accord when the Senate adjourned for the two-week break on March 26.

The bill cleared the committee on a party-line vote and without amendments. Democrats and Republicans agreed to try to reach consensus after the legislation hits the Senate floor and to amend the bill there. Dodd plans to take up the bill immediately after the recess and stands ready to work across the aisle, a Dodd aide who works on the panel confirmed late last week.

But the financial services industry and Senate Republicans are suspicious that Democrats are more interested in gaining a political weapon to use in the November elections than they are in bipartisanship. The skeptics believe the Obama administration and Senate Democrats are angling to pass a bill unacceptable to most Republicans by picking up just enough GOP support to thwart a filibuster.

“There is a path to an 80-vote Senate bill and everyone sees it. But the administration wants to jam it through and blame the Republicans,” said one Republican who works on K Street.

Democrats reject charges that they are pursuing a partisan path.

“I know that Sen. Dodd has worked very hard to put together a bipartisan bill, and I expect that to continue,” said Jim Manley, a top spokesman for Majority Leader Harry Reid (D-Nev.). “We need to put together 60 votes to get a bill out of the Senate, but not at the expense of our core principles, which include protecting middle-class families.”

Lobbyists monitoring the legislation caution that the Republican strategy remains a work in progress and that even the Democrats haven’t settled on their approach, although they appear more unified than the minority. But with health care finally in the rearview mirror, comprehensive discussions by McConnell and his team have begun.

The GOP’s first option appears to be giving Shelby some room to strike a deal with Dodd. Financial reform isn’t infected with the philosophical and political differences that impeded bipartisanship on health care. Senate Republicans would like to vote for this legislation and send a message to voters who remain angry with the Troubled Asset Relief Program and the notion that some companies are too big to fail.

However, if the administration and Senate Democrats insist on legislation that the GOP believes would overregulate Wall Street and hamper job creation and economic growth, GOP leaders want to be able to push back with a united front. Even if their opposition eventually breaks, Republicans would at least like to ensure that any Democratic victory is drawn out and politically painful.

“This week is the first time that the Republican leadership is really paying attention to this,” one lobbyist said Thursday. “I think they’re very much trying to figure out where they are. But if they can keep 41 together, the will is there to not just cede this over to the administration.”

Given the favorable political climate for Republicans at this point in the election cycle and voter unease with Washington, some GOP operatives argue that a fight over financial regulatory reform could benefit the minority. But many Republicans remain wary of appearing to back Wall Street at time when unemployment remains high.

Indeed, Republicans are likely to frame their goals for financial reform in terms of job creation and protecting the taxpayer, regardless of the legislative outcome.

“I think the GOP will continue the general message strategy of less government and lower taxes,” one Republican operative said. “The GOP base is fired up, and independents are very receptive to that message right now. I honestly don’t believe they need to veer off of that.”

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