Although the nation's mortgage meltdown has kept the Senate Banking Committee plenty busy, they managed to find a moment last week to deal with a far different threat to America — Iran. Last week's missile tests by Iran — even with its doctored photographs — got the attention of Senate Banking Committee Chairman Christopher J. Dodd.

Dodd and the committee's senior Republican member quickly hashed out a bill that seeks to impose economic sanctions on Iran to force its government to reconsider its aggressive behavior.

On Thursday, the committee voted 19-2 in favor of the "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2008," which Dodd and Sen. Richard Shelby, R-Ala., drafted.

"This bipartisan legislation will strengthen America's leadership in the effort to bring peace and stability to the Middle East," Dodd said.

"Given the magnitude of the threat Iran poses to American interests and global stability, it is essential that the Congress arm the executive branch with the tools necessary to deter and change Iran's current behavior in a manner that promotes peace," Shelby said. "In my judgment, this legislation gives the president additional leverage to meet that goal."

Patterned after a new U.S. law aimed at Sudan, the legislation encourages U.S. pension plan managers to divest, directly or indirectly, from Iran's energy sector. And, it gives state and local governments the authority to divest from any company that invests $20

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million or more in Iranian energy.

Dodd said that his committee has responsibility over virtually all aspects of the U.S. financial system, which gives them the responsibility to establish an economic sanctions policy against Iran.

"Targeted and strategic, the bill is designed to maximize the economic leverage on Iran's leaders to bring them to the negotiating table by tightening economic sanctions and authorizing divestment from companies that do business with Iran's key oil sector," Dodd said. "The legislation also cracks down on the illegal diversion of sensitive U.S. technologies to Iran."

Sen. Joseph I. Lieberman, also of Connecticut, said he thinks the bill makes a lot of sense — particularly as the Bush administration presses toward a diplomatic solution to its concerns with Iran's nuclear ambitions and support for insurgents in Iraq.

"Passage of this out of committee is a way to say to leadership in Iran that you now have a great opportunity to move to a peaceful resolution of the differences we have," he said.

Lieberman said that Iran has a choice — accept a generous offer from the United States to end the dispute or face stiffer economic sanctions. And, of course, Lieberman said there is always the prospect of military action — a place "none of us want to come to."

The Bush administration supports sanctions against Iran and has already signed on to three United Nations Security Council resolutions sanctioning Iran. But it is not clear whether it will endorse Dodd's approach.

Secretary of State Condoleezza Rice has previously expressed opposition to an Iran Sanctions Act that recently cleared the Senate Finance Committee.

In a letter to Finance Chairman Max Baucus, D-Mont., Rice said she feared the bill would divide the multilateral coalition that has come together to oppose Iran's nuclear program because it would require sanctions on firms from other nations that do business with Iran.

A second complaint — that it would effectively block a civil nuclear cooperation agreement between the United States and Russia — is not included in Dodd's version. But his would impose sanctions on independent foreign subsidiaries of U.S. companies that do business with Tehran.

Two Republicans voted against Dodd's bill. Sen. Chuck Hagel, R-Neb., complained that the bill does not directly sanction Iran but sanctions "allies, friends and others." He also suggested that the solution could undermine multilateral talks with Iran that were set to take place this weekend in Geneva.

Dodd says he will try to reach a compromise that will satisfy the White House, Baucus and Senate Foreign Relations Chairman Joe Biden, D-Del. If they can come to an agreement, a final sanctions resolution could be attached to a bill the Senate will likely consider this week that would authorize defense spending in the next fiscal year.

If an agreement takes longer to hammer out, the sanctions bill will likely fall into the dustbin of legislation that died by the clock.

Senate Majority Leader Harry Reid has set aside just two more weeks of work here in the Capitol before sending his minions off on their August recess. They won't return until after the presidential nominating conventions when there will be likely little appetite for bipartisan cooperation.

Peter Urban, who covers Washington, can be reached by e-mail at purban@ctpost.com.