GOP uses budget, other tools to sap financial law (AP)

WASHINGTON – President Barack Obama's financial overhaul law is nearly a year old. For congressional Republicans, the fight to weaken it is just starting.

Wary of trying to repeal the entire statute and being portrayed as Wall Street's protectors — banks rank among the country's least popular institutions — GOP lawmakers are trying to nibble away at the behemoth measure. It's a crusade they've waged all year, despite lacking the White House and Senate control they need to prevail.

Days ago, one Republican-run House committee approved bills diluting parts of the law requiring reports on corporate salaries and exempting some investment advisers from registering with the Securities and Exchange Commission. Another House panel voted to slice $200 million from Obama's $1.4 billion budget request for the SEC, which has a major enforcement role.

Meanwhile, Senate Republicans are continuing a procedural blockade that has helped prevent Obama from putting Elizabeth Warren or anyone else in charge of the Consumer Financial Protection Bureau, which opens its doors in two weeks.

The law hurts "the formation of capital, the cost of capital and access to capital, and you can't have capitalism without capital," said Rep. Jeb Hensarling, R-Texas, a leader of the House Financial Services Committee. "So Republicans in the House will be examining each and every one of the 2,000-plus pages" of the law, which he called "a job creator's nightmare."

Confident that Obama and the Democratic-controlled Senate can prevent the House from doing major damage, Democrats view the Republican drive as a political exercise — for now.

"It's mostly setting a marker for the election. And it helps with their campaign contributions," said Rep. Barney Frank, D-Mass., who chaired the Financial Services Committee last year and was a chief author of the law. "But it also tells people in the financial community that if they win the next election, they'll be able to undo it all."

The financial industry leans Republican in its campaign contributions but not overwhelmingly. Sixty-one percent of the $9 million that commercial banks gave federal candidates for the 2010 elections went to Republicans, while 54 percent of the securities and investment industry's $9 million went to Democrats, according to the nonpartisan Center for Responsive Politics.

Democrats are using the GOP drive for their own fundraising.

In one email sent last week under Frank's name soliciting money for House candidates, the party wrote that Republicans want to "bring back the days of unrestrained excess, deception and de-regulation of Wall Street." The mailing called it "payback to their big contributors in the financial services industry."

Obama signed the banking and consumer protection measure last July 21, a keystone achievement that responded to the biggest financial crisis and most severe recession since the 1930s. It passed Congress with solid Democratic support and near-uniform GOP opposition.

Among its provisions, the law:

• Created the consumer protection agency to oversee mortgages, credit cards and other financial products.

• Established a body of regulators to scan the economy for threats to the financial system.

• Required banks to hold back money for protection against losses.

• Curbed the trading of derivatives, speculative investments partly blamed for the 2008 financial crisis.

• Gave the Federal Reserve powers to oversee huge companies whose failures could jeopardize the entire financial system.

Yet the law was just a start, since it ordered federal agencies to craft rules to enforce it. As of July 1, out of an estimated 400 regulations to be written, 38 are complete. That leaves 362 proposed, facing a future deadline or having missed due dates for completion, according to the law firm Davis Polk.

Republicans say the overhaul went too far and has saddled banks and other companies with requirements that harm their competitiveness. The House Financial Services panel alone has held more than a dozen hearings on the law, in part to underscore to administration witnesses that some provisions — like forcing banks to hold back capital as a hedge against losses — will hurt business, according to the committee's chairman, Rep. Spencer Bachus, R-Ala.

"What we are doing is rational, it is sensible, it is entirely practical, it is compassionate," said Rep. Nan Hayworth, R-N.Y., a tea party-backed freshman on that panel. "So we are doing the right thing, and it behooves the Senate and the administration to follow suit."

The highest-profile fight has been over Warren, picked by Obama to set up the new consumer bureau. Many Democrats and liberal groups want her to become its first director.

Following a May clash between Warren and a House subcommittee chairman, House Oversight Committee Chairman Darrell Issa, R-Calif., plans to question the Harvard law professor and long-time consumer activist at a July 14 hearing about her role shaping the new agency.

Meanwhile, 44 GOP senators have promised to block a vote on any nominee unless the bureau is made "accountable to the American people" by replacing the director with a board of directors and giving Congress control over its budget. Forty-one senators can prevent a nomination from coming to a vote.

"You try to get leverage where you can. In the Senate, nominations are your leverage," said Mark A. Calabria, who monitors financial regulation at the conservative-leaning Cato Institute.

On another front, Republicans want to cut the budgets of agencies that are supposed to enforce the overhaul.

Besides denying the SEC extra money next year, the House Appropriations Committee would limit the consumer protection bureau to $200 million, well below the $329 million Obama wants. The full House has voted to hold the Commodity Futures Trading Commission, which oversees derivatives, to $171 million, short of this year's total and less than two-thirds of what Obama wanted.

Republicans cast the cuts as part of their deficit-cutting drive, but Democrats say the reductions are designed to obstruct the new law.

SEC Chairwoman Mary Schapiro said in a speech this spring that budget cuts would mean "an investor protection effort hobbled."

Republicans blast Obama, not each other (Reuters)

MANCHESTER, New Hampshire (Reuters) – Republican White House contenders focused their attacks on President Barack Obama and refrained from attacking each other on Monday in their first major debate of the 2012 nominating race.

The seven Republican hopefuls criticized Obama as a failure on the economy and knocked his healthcare reform as a gross government intrusion, but sidestepped numerous chances to hit their party rivals in the face-to-face encounter.

"This president has failed, and he's failed at a time when the American people counted on him to create jobs and get the economy growing," said former Massachusetts Governor Mitt Romney, who leads the Republican pack in opinion polls.

Former Minnesota Governor Tim Pawlenty, who on Sunday took a swipe at Romney's Massachusetts healthcare plan and called it "Obamneycare," carefully avoided a direct challenge to Romney as the contenders played nice with each other.

Romney defended the plan, a precursor to Obama's 2010 healthcare overhaul law that has become a lightning rod for conservative critics, and said it was different in part because it did not raise taxes and was state-based.

"If people don't like it in our state, they can change it. That's the nature of why states are the right place for this type of responsibility," Romney said.

Obama leads most opinion polls against potential Republican challengers in 2012, but his position has begun to slip in recent weeks as the economy struggles to recover.

The nationally televised forum in New Hampshire included most of the top-tier contenders for the Republican presidential nomination -- a battle for the right to challenge Obama, a Democrat. New Hampshire holds an important early contest on the road to the Republican nomination.

"Any one of the people on this stage would be a better president than President Obama," Romney said.

'A DEFEATIST ATTITUDE'

The candidates declined to join in Democratic criticism of Pawlenty's economic plan for relying on a rarely achieved 5 percent growth to fund his tax cuts. Pawlenty accused his critics of a failure of ambition.

"This idea that we can't have 5 percent growth in America is hogwash. It's a defeatist attitude," he said.

Romney, who failed in a 2008 bid for the Republican nomination, is an uneasy front-runner in a group that has drawn complaints from some in the party for being weak.

"It was a very strong night for Mitt Romney," said Dante Scala, a political scientist at the University of New Hampshire.

Representative Michele Bachmann, who had not entered the race before Monday, said she had just filed the paperwork to formally run for president. Jon Huntsman, the former governor of Utah who served as U.S. ambassador to China under Obama, also is expected to enter the race in the next few weeks.

Sarah Palin, the 2008 Republican vice presidential nominee, also is still considering a potential run. She did not take part on Monday night.

The Republicans showed few policy differences during the debate. They mostly backed Representative Paul Ryan's budget proposal that would scale back the Medicare health insurance plan for the elderly and disabled, and did not support raising the debt ceiling without dramatic spending cuts.

"We're not that far apart on all the big issues," said former pizza executive Herman Cain.

Former House of Representatives Speaker Newt Gingrich, who had to apologize for criticizing Ryan's plan as he launched his campaign, said he supported it as "a general proposal" but would do some things differently. He warned Republicans to get public approval for the moves.

"If you're dealing with something as big as Medicare and you can't have a conversation with the country where the country thinks what you're doing is the right thing, you better slow down," Gingrich said.

The debate on the campus of Saint Anselm College in Manchester, New Hampshire, was an early look at the contenders for the activists in the early-voting state who will play a critical role in the 2012 nominating battle.

The presidential election will be held in November 2012.

Romney, Bachmann and Gingrich skipped a lightly attended debate last month, but appeared on Monday with four contenders who participated in the first one -- former Senator Rick Santorum, Pawlenty, Cain and Representative Ron Paul.

Bachmann, a fiery conservative from Minnesota, has earned a following on cable TV news shows and among Tea Party activists with her outspoken condemnations of Obama and Washington insiders. She promised that Republicans would oust Obama in 2012.

"President Obama is a one-term president," she said.

Gingrich was not asked about last week's desertion by most of his senior campaign staff over disagreements on the future of his campaign.

SEC scans Goldman, other firms' Libya dealings: report (Reuters)

(Reuters) – The Securities and Exchange Commission is examining whether Goldman Sachs Group Inc and some other financial companies violated bribery laws in dealings with Libya's sovereign-wealth fund, the Wall Street Journal reported, citing people familiar with the matter.

Enforcement lawyers at SEC are reviewing documents that detail the firms' relationships with the Libyan Investment Authority controlled by the nation's leader, Muammar Gaddafi, the paper said.

The regulators are interested in a $50 million fee that Goldman initially agreed to pay the fund, but the payment was never made as discussions were halted before violence erupted in Libya early this year, the paper said.

The absence of a transaction does not exempt the bank from the federal Foreign Corrupt Practices Act, which bans U.S. companies from offering or paying bribes to foreign government officials or employees of state-owned companies, the paper said.

The Journal added that Carlyle Group, Och-Ziff Capital Management Group, JPMorgan Chase and several other companies had significant dealings with the Libyan Investment Authority.

"We are confident that nothing we did or proposed was or could have been a breach of any rule or regulation," the Journal quoted Goldman spokesman Lucas van Praag as saying. "We retained outside counsel, as is our normal practice for any transaction, to ensure that we were compliant with all applicable rules."

An SEC spokesman declined to comment to the paper.

Reuters was unable to reach Goldman, Och-Ziff, JPMorgan, Carlyle or the SEC outside normal U.S. business hours.

The Journal said last week that Goldman invested more than $1.3 billion from Libya's sovereign-wealth fund in currency bets and other trades in 2008 and the investment lost more than 98 percent of its value.

(Reporting by Vaishnavi Bala in Bangalore; Editing by Lisa Von Ahn)