Polls in Arkansas don’t close until 8:30 pm ET, but most observers are already predicting that a June 8 runoff election between Senator Blanche Lincoln and challenger Bill Halter will be necessary. Meanwhile, Lincoln’s left-pleasing derivatives-regulating amendment to the Senate bank overhaul bill was supposed to bolster her support with the Democratic base, so it couldn’t be killed until she won or lost her primary.

The big problem with it the derivatives ban was that it attracted a lot of support, but not from the right people. Senators on the left and right liked it, and the unwashed masses seemed on board, but the Serious Adults who allowed this crisis to happen in the first place and who are also all still in charge of everything all thought it was a bit much.

It looks like Chris Dodd came up with the compromise, which is brilliant in its simplicity. Everyone gets to vote “for” the “ban” without worrying about the ban ever happening, because the council of regulators who’ll study the ban before implementing it is made up entirely of people who are opposed to the proposal. The council will even be chaired by Treasury Secretary Tim Geithner, who will have final say about whether to enforce the ban. (Hint: he will decide not to.)

The biggest question right now: whether bank holding companies and other financial institutions that take advantage of various forms of federal support should be allowed to trade derivatives. As it stands right now, the Dodd bill includes Sen. Blanche Lincoln’s notoriously strong proposal requiring bank holding companies to completely spin off their derivatives trading operations.

Republicans, the White House, Sen. Chris Dodd, the banking industry, and even former Federal Reserve Chairman Paul Volcker all think the Lincoln language goes too far. But according to one popular theory, the Senate has decided to take no action to loosen her rules until after today’s Arkansas Democratic primary, in which Lincoln is attempting to fend off a challenge from the left by state Attorney General Bill Halter. The scuttlebutt Tuesday morning was that Sen. Dodd and Sen. Richard Shelby, the Senate Banking Committee’s ranking Republican, were busy cooking up a “manager’s amendment” that will do the dirty work and be voted on at the last minute before a final vote on the bill. Failing that, there’s always the chance that significant changes could be made during the conference process when Senate and House negotiators reconcile the varying language in their bills.

Paul Volcker, the originator of “the Volcker rule,” believes Lincoln’s proposal interferes with legitimate derivatives trading on behalf of bank customers. His proposal would allow banks to continue to buy and sell derivatives for clients while preventing them from speculating in derivatives for their own profit using depositor money guaranteed by federal insurance. However, as it currently stands, the Dodd bill only requires that regulators study whether the Volcker rule would be a good idea and then make a decision as to whether to implement it.

Finally, there’s an important amendment proposed by Democratic Sens. Jeff Merkley and Carl Levin that still awaits a vote. The Merkley-Levin amendment would make the Volcker rule into the immediate law of the land, and contains specific rules on what banks are allowed to do. Volcker supports the Merkley-Levin amendment, but Dodd does not.

Thanks largely to the emergence of the blogosphere, we, the general Internet-connected public, have a greater ability to track and understand the legislative process than ever before. The incredibly detailed coverage of every twitch in the year-long struggle over healthcare reform served as Exhibit A of this new reality. Bank reform is Exhibit B.

Consider Merkley-Levin. On Sunday, the New York-based finance lawyer who writes the blog Economics of Contempt blasted the Merkley-Levin proposal as completely unworkable.

Zach Carter at the Huffington Post, Mike Konczal at Rortybomb and, unsurprisingly, Merkley’s office promptly disagreed, with varying degrees of vociferousness. Read all four posts and you will feel pretty informed. Personally, Volcker’s support and the banking industry’s intense opposition clinch the deal for me. I’m looking forward to the vote on the amendment — judging by the Senate’s track record over the last couple of weeks, it might even pass.

So far, almost every step of the process of creating new derivatives legislation has been remarkably public, and I would argue that the constant glare of attention from the Internet-enabled masses has gone a long way toward defeating lobbyists’ attempts to cut a backroom deal. The lobbyists don’t like the Volcker rule, don’t like Merkley-Levin, and hate, hate, hate Blanche Lincoln’s ban. But with a majority of senators mindful of popular sentiment against Wall Street, and a universe of bloggers and reporters tracking every blip on the financial radar, lobbyists are finding themselves, so far, relatively powerless.

And yet, here we are at the endgame, and we don’t really know whether all that transparency will finish the job. We know that Dodd and Shelby are working on their mysterious manager’s amendment even now. We know that pressure from lobbyists and the administration will be intense during the conferencing process. We know that sometime this week, or maybe next, the rubber will hit the road. And it’s worth asking, what good will all the clarity and transparency that the process has enjoyed up to now end up being worth, if at the last minute a backroom handshake seals an undemocratic deal?

UPDATE: Republicans appear to be doing their best to block any further votes on “controversial” amendments.

LATER UPDATE: The fix is in: Dodd offers his own amendment that would “delay implementation” of the Lincoln plan.

But something else is scheduled for next week — Sen. Blanche Lincoln’s Arkansas primary, in which she has been challenged from the left by state Attorney General Bill Halter. According to a story by Carrie Budoff-Brown in Politico, Senate Democrats may be holding off any action to weaken the derivatives language until after Tuesday’s primary.

Trying to shore up her left flank, Lincoln went further than the White House, the House and the Senate Banking Committee to crack down on derivatives, the complex financial instruments at the heart of the 2008 economic crisis.

And Lincoln’s in no mood to compromise just days before her May 18 primary. So Democratic leaders have held back from going too far to force changes in her bill and risk embarrassing Lincoln ahead of the vote, according to multiple Senate aides and industry officials familiar with the negotiations.

But with the White House and former Federal Reserve Chairman Paul Volcker both arguing that Lincoln’s derivatives regulation goes too far, the conventional wisdom expects a deal that will ease Wall Street’s fears to be made, either next week, before a final vote, or in conference when the House and Senate attempt to reconcile the language of their reform bills (in the event that the Senate ends up passing the Dodd bill.)

There are reasons to be cheerful about how the bill is surviving the grinding amendment process. Republican efforts to weaken consumer protection and derivatives regulation have been beaten back, and one could make an argument that the majority of amendments that have passed have actually strengthened the bill. Just this morning, an amendment proposed by Sen Al Franken that would shift responsibility for initial ratings of securities from the credit rating agencies to the SEC passed 64-35. But there is still no guarantee that the final outcome will be strong enough to fix what ails Wall Street.

The only real guarantee is that the bill won’t veer into radical territory on the right or the left. Which, strange to say, is testimony to Dodd’s masterful leadership. Attempts to gut the bill are getting beaten back, along with attempts to upgrade the bill into industrial strength. So on the one hand, an aggressive — and likely disastrous — Republican attempt to unwind Fannie Mae and Freddie Mac — which between them guarantee 97 percent of U.S. home mortgages — failed to pass, but so did a Democratic effort to mandate that too-big-to-fail banks be broken up. And after some adroit maneuvering, the most radical amendment that had a real shot at passing — Sen. Bernie Sanders “Audit the Fed” amendment — was substantially watered down into an “Audit the Fed just once” amendment.

So that’s the basic picture: Conservative GOP efforts to derail the bill are failing, as a handful of moderate Republicans consistently side with Democrats. Progressive attempts to supercharge the bill are going nowhere, beaten down by sizable majorities. But incremental, sensible improvements targeting abuses in such areas as the mortgage lending and credit ratings businesses, or requiring more transparency from the Fed, are passing. So far, in sum, the bill appears to be improving as the process plays out. That’s not necessarily how Congress usually works, so I guess it’s something to be happy about.

But then, there’s always next week.

But it’s quite possible that the opposite is true — that it’s the Democrats who caved. We don’t have enough details  yet to be sure, but if the assurances that Shelby received from Dodd included a decision to drop the $50 billion bank “orderly liquidation fund,” then the real winners here are the GOP and the banks.

The Dodd bill raises the $50 billion fund via a direct assessment on banks. The big banks hate the idea, because that money comes directly out of their current profits. According to one theory, when the Republican Senate leadership met with Wall Street executives in New York a few weeks ago, the banks made it clear that their No. 1 priority was scuppering the fund.

The New York Times reports:

Republicans insisted that they had won some crucial concessions from Democrats, including the elimination of a proposed $50 billion fund that would be paid for by big financial companies and would be used to help pay for putting failed banks out of business.

Or there’s a third scenario, with the truth somewhere in between. Grumbling by moderate Republicans has been growing louder, which could have convinced Shelby to take as an “assurance” something a little less tangible than an out-and-out commitment to dump the fund. Certainly, the somber tone of statements released by both Mitch McConnell and Richard Shelby, stressing the areas of disagreement that still exist — consumer financial protection and derivatives regulation — do not sound like victory declarations.

But as the media rushes to crown Democrats with the garland of victors, let’s just remember — if the fund is gone, Wall Street won its first major skirmish.

1. Require that trading of all derivatives be done on open exchanges where parties have to disclose what they’re buying and selling and have enough capital to pay up if their bets go wrong. The exception in the current bill for so-called unique derivatives opens up a loophole big enough for bankers to drive their Ferraris through.

2. Resurrect the Glass-Steagall Act in its entirety so commercial banks are separated from investment banks. The current bill doesn’t go nearly far enough. Commercial banks should take deposits and lend money. Investment banks should be limited to the casino we call the stock market, helping companies issue new issues and making bets. Nothing good comes of mixing the two. We learned this after the Great Crash of 1929, and then forgot it in 1999 when Congress allowed financial supermarkets to do both.

3. Cap the size of big banks at $100 billion in assets. The current bill doesn’t limit the size of banks at all. It creates a process for winding down the operations of any bank that gets into trouble. But if several big banks are threatened, as they were when the housing bubble burst, their failure would pose a risk to the whole financial system, and Congress and the Fed would surely have to bail them out. The only way to ensure no bank is too big to fail is to make sure no bank is too big, period. Nobody has been able to show any scale efficiencies over $100 billion in assets, so that should be the limit.

Wall Street doesn’t want these three major reforms because they’d cut deeply into profits, and it’s using its formidable lobbying clout with both parties to prevent these reforms even from surfacing. It’s time for Main Street — Tea Partiers, coffee partiers and beer drinkers — to be heard.