WASHINGTON -- Some Republican lawmakers say the government is playing politics with a new measure to regulate Wall Street by bringing charges against mega bank Goldman Sachs just as debate heats up over the financial reform bill.
The massive legislation creates a new consumer protection bureau to guard against lending abuses and brings new regulations to the largely unsupervised derivatives market.
"You either believe we need to strengthen oversight of Wall Street or you don't," Majority Leader Harry Reid, D-Nev., said.
GOP Threatens Filibuster
To get any regulations passed, Democrats in the Senate need their Republican colleagues. But some GOP lawmakers have promised to filibuster the bill if they don't like it.
Meanwhile, banks are lobbying lawmakers hard, warning harsh regulations will only siphon money that's helping fuel the weak economy.
"If you take money out of that system - and there's a lot of it - you have a system that grinds to a halt," said Anton Schutz with the Burnham Financial Services Fund.
Senate Democrats have proposed including a $50 billion fund that Republicans say will be used to prop up troubled banks in the future.
"We need to end bailouts," Sen. Joh Kyl, R-Ariz., said.
President Obama and congressional Democrats are blaming the financial and economic meltdown on Wall Street.
While the financial capital did play a big role in the crisis, some critics say others are also to blame - including Washington, which made a big push for home ownership.
Also at fault are the mortgage industry, which loaned massive amounts of money to people who had no means to pay them back, and consumers, who took on more debt then they could handle.
But so far Goldman Sachs is the only institution being charged.
Goldman Charges a Political Ploy?
Although the Securities and Exchange Commission is suing the company for fraud, some are wondering if there was political motivation to bring the charges just as the financial reform bill was coming up.
Three Democratic commissioners voted to bring the charges, while two Republicans voted against them.
Some analysts wonder if the charges will hold up.
"Unless the SEC is sitting on more evidence than it has laid out so far, the charge sheet looks flimsy," economic expert Sebastian Mallaby wrote in The Washington Post. "If Goldman has become a poster child for excessive power on Wall Street, the SEC might become a poster child for government power run amok."
"The SEC's 22-page complaint states that Goldman sold fancy mortgage securities without disclosing that a hedge fund manager, John Paulson, was betting that those same securities would go bad. This is a non-scandal," he said.
Politicians are also now deciding what to do with money Goldman Sachs employees have donated to their campaigns. Obama received nearly $1 million for his presidential bid. Reid attended a fundraiser with the company's president this year that raised nearly $40,000.