Senate Republicans voted to block a bill aimed at tightening regulation of the financial system from being debated yesterday, in a move President Barack Obama said American people "can't afford".

The Democrats needed 60 votes from the 100 senators in the house to begin debating the bill, which proposes a government levy on big banks, changes to rules on derivatives trading and the establishment of a consumer financial protection agency.

The White House officially endorsed the bill before the vote, and had been hoping that the $1bn (£650m) fraud prosecution of Goldman Sachs would give fresh wind to anti-Wall Street sentiment, making the case for accepting the proposals unavoidable.

However the Democrats fell three votes short of the required number, with 39 Republicans voting against the bill and one Democrat, senator Ben Nelson, also opposing the motion. The final vote was 57-41, with Democrat Senate majority leader Harry Reid switching to a 'no' vote when the result became clear – a political manoeuvre that will enable Reid to call for a new vote as early as today, with Democrats convinced people pressure will eventually convert Republican senators, ensuring the bill is passed.

Both parties have made it clear they want new legislation, with Democrats and Republicans keen to bolster their vote ahead of November's congressional elections through a show of sternness towards the financial sector. Republicans have joined in Democrat criticism of Wall Street and have voiced hope that new measures will ultimately be introduced, but say the bill as it stands does not go far enough in its reforms.

Senate Republican leader Mitch McConnell had argued before yesterday's poll that a vote to delay debate was not a vote against regulation, but for a bipartisan bill.

"All of us want to deliver a reform that will tighten the screws on Wall Street," McConnell said. "But we're not going to be rushed on another massive bill based on the assurances of our friends on the other side."

Richard Shelby, the top Republican on the banking committee, also sought to clarify the opposing senators' stance.

"Most Republicans want a bill, but they want a substantive bill," he said.

However the Democrats are said to be prepared to force Republican senators to block the present bill time and again until their unity cracks.

"I don't think it's a tenable political position for the Republicans to be in," White House spokesman Robert Gibbs said yesterday, while Reid mocked the opposition's cohesion.

"As far as I can tell, the only thing Republicans stand for is standing together," he said.
The White House had issued its endorsement of the bill less than an hour before the vote, stressing that Obama would oppose adding any loopholes. Following the vote, the president said he was "deeply disappointed" and urged senators to put the interests of the country ahead of their party.

"Some of these senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether," Obama said in a statement. "But the American people can't afford that."

The Mexican president, Felipe Calderón, has condemned Arizona's new immigration law and warned that relations with the border state will suffer as a result.

The law, which gives the police the right to stop anyone they suspect is an illegal immigrant, "opens the door to intolerance, hate, discrimination and abuse in law enforcement", Calderon said last night. Trade and political ties with Arizona would be "seriously affected", he warned.

"Nobody can sit around with their arms crossed in the face of decisions that so clearly affect our countrymen," Calderon said in a speech at the Institute for Mexicans Abroad.

His comments came as the furore over the law escalated, with calls growing in the US for a boycott of hotels, convention centres and other economic targets in Arizona.

Opponents of the legislation say it will lead to victimisation of anyone who looks or sounds Latino. Supporters say the legislation is needed because the state can no longer cope with an estimated 450,000 illegal immigrants.

The head of the Organisation of American States, José Miguel Insulza, said: "We consider the bill clearly discriminatory against immigrants, and especially against immigrants from Latin America."

The government of the Mexican state of Sonora, which sits across the border from Arizona, announced it would not attend a co-operation meeting the two states have held annually for four decades. The meeting of the Sonora-Arizona commission was set for June in Phoenix, Arizona.

"This is not about a breaking of relations with Arizona but rather a way to protest at the approval of the law," the state government said.

Democratic members of the US Congress, religious leaders and leftwing activists have urged a boycott of economic targets in the state. At least one national group has responded by cancelling a convention planned for the autumn. Scores of lorry drivers were reported in the US media to have threatened to stop carrying freight to and from the state.

The bill, signed into law on Friday, gives police the right to stop anyone "if reasonable suspicion exists that the person is an alien who is unlawfully present in the US". It has polarised opinion across the US, creating a clear divide between Democrats and Republicans.

Cleaning crews were called to the state legislative building this morning to clear swastikas daubed on it overnight. And a Democratic congressman from Arizona, Raúl Grijalva, who called for an economic boycott against "unjust and racist" legislation, was forced to close his office at the weekend after receiving two death threats.

Among those calling for a sweeping boycott of Arizona businesses was the San Francisco attorney, Dennis Herrera, who urged city departments to look at contracts with Arizona that could be terminated.

He said: "Arizona has charted an ominous legal course that puts extremist politics before public safety and betrays our most deeply held American values."

He noted that a similar boycott 20 years ago, which included the National Football League's decision to move the Super Bowl from the state, led to Arizona dropping its refusal to recognise Martin Luther King Day.

At a rally on Sunday, Grijalva, one of Congress's leading advocates of immigration reform that would offer a route to citizenship for illegal immigrants, called for President Barack Obama to use his executive powers to block the legislation.

The sports editor of the leftwing publication the Nation, Dave Zirin, announced he would no longer write about the Arizona Diamondbacks baseball team. "For me, they do not exist. They will continue to not exist in my mind as long as the horribly named 'Support Our Law Enforcement and Safe Neighbourhoods Act' remains law in Arizona," he wrote.
The board of governors of the American Immigration Lawyers Association, based in Washington, ordered its executive to move a convention planned for this autumn from Arizona. The association president, Bernie Wolfsdorf, said: "We cannot in good conscience spend association dollars in a state that dehumanises the people we represent and fight for."

The Rev Al Sharpton, an advocate of African-American rights, said in New York that he would organise "freedom walkers", just as the civil rights movement had organised freedom riders to board segregated buses in the 1960s. "We will go to Arizona when this bill goes into effect and walk the streets with people who refuse to give identification and force arrest," Sharpton said.

PHOENIX -- The debate over Arizona's new illegal immigrant law will likely move from protest lines and talk shows to the courtroom, where a judge could be asked to decide whether the state can enforce laws that until now had been the federal government's exclusive domain.

Republican Gov. Jan Brewer, who signed the bill on Friday, said Arizona must act because Washington has failed to stop the flow of illegal immigrants and drugs from Mexico.

Opposition to the law grew Monday as opponents used refried beans to smear swastikas on the state Capitol, civil rights leaders and others demanded a boycott of the state, a petition drive began to put the measure to a public vote and the Obama administration weighed a possible legal challenge.

Activists are planning a challenge of their own, hoping to block the law from taking effect by arguing that it encroaches on the federal government's authority to regulate immigration and violates people's constitutional rights by giving police too much power.

The measure -- set to take effect in late July or early August -- would make it a crime under state law to be in the U.S. illegally. It directs state and local police to question people about their immigration status if there is reason to suspect they are illegal.

April 25: Thousands of protesters rally at the Arizona Capitol to fight a tough new state law targeting illegal immigrants.

"If you look or sound foreign, you are going to be subjected to never-ending requests for police to confirm your identity and to confirm your citizenship," said Alessandra Soler Meetze, executive director of the American Civil Liberties Union of Arizona, which is exploring legal action.

Employees at the Capitol came to work Monday to find that vandals had smeared swastikas on the windows. And protesters gathered for an eighth straight day to speak out against a law they say will lead to rampant racial profiling of anyone who looks Hispanic.

Jon Garrido, who produces a Hispanic website and ran unsuccessfully last year for Phoenix City Council, told The Arizona Republic Monday he pulled organizing papers for a petition drive to repeal the law. A referendum would require the signature of 76,682 registered voters to get on the November ballot. If successful, the effort would block the law from taking effect until the vote.

President Barack Obama, who warned last week that the measure could lead to police abuses, asked the Justice Department to complete a review of the law's implications before deciding how to proceed.

Currently, many U.S. police departments do not ask about people's immigration status unless they have run afoul of the law in some other way. Many departments say stopping and questioning people will only discourage immigrants from cooperating to solve crimes.

Under the new Arizona law, immigrants unable to produce documents showing they are allowed to be in the U.S. could be arrested, jailed for up to six months and fined $2,500. That is a significant escalation of the typical federal punishment for being here illegally -- deportation.

People arrested by Arizona police would be turned over to federal immigration officers. Opponents said the federal government could thwart the law by refusing to accept them.

Supporters of the law said it is necessary to protect Arizonans. The state is home to an estimated 460,000 illegal immigrants and is the nation's busiest gateway for people slipping into the country. Brewer has ordered state officials to develop a training course for officers to learn what constitutes reasonable suspicion that someone is in the U.S. illegally.

The crux of opponents' arguments is that only the federal government has the authority to regulate immigration.

"If every state had its own laws, we wouldn't be one country; we'd be 50 different countries," said Thomas Saenz, president and general counsel of the Mexican American Legal Defense and Educational Fund.

Kevin Johnson, dean of the law school at the University of California-Davis and an immigration law professor, said such a lawsuit would have a very good chance of success. He said the state law gets into legal trouble by giving local law enforcement officers the authority to enforce immigration laws.

However, Gerald Neuman, a Harvard Law School professor, said Arizona could make a compelling legal argument that it has overlapping authority to protect its residents.

Kris Kobach, a University of Missouri-Kansas City law professor who helped write the Arizona legislation, said he anticipated legal challenges and carefully drafted the language. He said the state law is only prohibiting conduct already illegal under federal law.

San Francisco's city attorney has urged policymakers in the city to stop dealing with Arizona and Arizona businesses. Leaders in Mexico also demanded a boycott, as did civil rights leader Al Sharpton.
During a town hall meeting Monday in Tucson, Brewer dismissed the threat of a boycott, saying she doesn't believe the law is "going to have the kind of economic impact that some people think it might," the Arizona Daily Star reported.

The law has strong public support in Arizona, where passions have been running high since a rancher was killed close to the Mexican border last month, apparently by drug smugglers from across the border.