Controversial proposals for new restrictions on the American financial sector have been rejected by the country's senate.

Controversial proposals for new restrictions on the American financial sector have been rejected by the country's senate.

Each of the 41 Republican senators opposed the bill, tabled by Democrat senator and banking committee chairman Chris Dodd, which needed 60 votes to progress but only received 58. Democrat Ben Nelson sided with the Grand Old Party (GOP) in a move that is likely to anger party members.

President Barack Obama expressed deep disappointment at the result, accusing the legislation's opponents of viewing "obstruction as a good political strategy" and suggesting that some with vested interests are seeking to "take this debate behind closed doors".

The GOP's rejection of the scheme could prove detrimental to the party, with US public desire for Wall Street reform remaining strong and memories of the recession still fresh.

Last week, International Monetary Fund chief Dominique Strauss-Kahn expressed reservations about the US plans, suggesting to the Financial Times that he would prefer co-ordinated global action on new financial regulations.