Wall Street Rumbling Felt in Advance of November Elections

May 6, 2010 -- Legislation that would impose tougher regulations on Wall Street is moving through Congress slowly but is quickly becoming an issue in dozens of competitive congressional races across the country.

Months after lawmakers finished a bruising debate on President Obama's health care law, candidates from both parties are distancing themselves from Wall Street as the November general election nears.

The Democratic National Committee, for instance, is airing a television ad accusing the GOP of standing aside "as Wall Street ran wild."

The National Republican Senatorial Committee (NRSC) has called out Democrats who take campaign money from "the same Wall Street executives they criticize publicly."

"The collapse of the economy is tied directly to Wall Street," said Colleen Hanabusa, a Democrat running for the House of Representatives in Hawaii's upcoming special election. "This, to me, is one of the major causes of why we're in the situation that we're in." She vowed to hold banks accountable in an April television ad.

After boosting their numbers in the 2006 and 2008 elections, Democrats face a daunting political challenge in 2010. The non-partisan Rothenberg Political Report rates 78 Democratic seats as competitive this year, compared with 18 Republican seats. The president's party has lost seats in Congress in 10 of the past 12 midterm elections.

Nathan Gonzales, political editor with Rothenberg, says Democrats believe they have found a populist message that could benefit them. "You're not going to have candidates saying, 'I support less accountability from Wall Street,'" he said.

Democrats such as Senate Majority Leader Harry Reid of Nevada, himself facing a difficult re-election bid, went on the offense in April after Republicans voted against starting debate on the measure. Republicans ultimately let the bill advance.

Since then, Republican candidates have argued that the bill would sweep small banks up into regulations intended for Wall Street firms. At stake, they say, are thousands of Main Street banking jobs.

"We're all for financial regulatory reform," said Steve Stivers, an Ohio Republican and former bank lobbyist running in a competitive House district that covers western Columbus. "But the form it's in, it really kills jobs."

That message is similar to one offered by Amber Marchand, a spokeswoman for the NRSC, which has targeted Rep. Paul Hodes, a Democrat running for Senate in New Hampshire, and Washington Democratic Sen. Patty Murray, for accepting campaign money from Goldman Sachs.

Goldman's political action committee and employees have given 65% of their contributions to Democrats for the 2010 election, according to the Center for Responsive Politics. The investment firm is fighting Securities and Exchange Commission fraud charges.

"Republicans and Democrats support Wall Street reform," Marchand said. "The debate is over Democrats' desire to rush through a bill that will hurt Main Street in the process."

The Senate began voting on amendments to the bill Wednesday, including a 96-1 vote to assert that taxpayer money will not be used to rescue failing companies. Reid has said work will continue through next week.

Lawmakers are negotiating details, but the main provisions of the bill include a new consumer protection agency under the Federal Reserve and a council of regulators that would monitor systemwide risks to the economy.

The House passed its version of the bill in December.

Polls show public support for some form of the legislation.

An April Gallup Poll found 46% of Americans want to give the government new power to regulate financial institutions.

When the question was changed to include the words "Wall Street banks," support grew to 50%.

Passions don't run as high on the Wall Street bill as they did during the health care debate, when voters turned out in droves at congressional town hall meetings last year. But Maryland Rep. Chris Van Hollen, chairman of the Democratic Congressional Campaign Committee, said the issue will be potent.

"It tells voters a lot about where the Democrats are and where the Republicans are," he said.