The new war over Wall Street

President Obama and congressional Republicans are on a collision course over Wall Street regulations.

Republicans are eyeing a host of changes and revisions to the Dodd-Frank financial reform law after racking up a string of victories on that front in recent weeks.

But after acquiescing in a pair of must-pass bills, Obama is now adopting a more strident tone about changes to his 2010 financial overhaul, warning in the State of the Union that there are some things he simply will not accept.

{mosads}Liberal Democrats, some of whom had blasted the White House for accepting changes to Dodd-Frank in December, say they are thrilled by the president’s get-tough approach.

“I saw it as him throwing the gauntlet down,” said Rep. Keith Ellison (D-Minn.). “He’s saying, ‘That’s it.’ ”

But veto threats from the White House when it comes to Dodd-Frank are nothing new, and Republicans are expressing confidence they can make gains by seeking to repeal and alter provisions of the law as part of broader legislation that has Democratic support.

Industry advocates, meanwhile, see openings to move through small, targeted changes to the financial regulations that they say are overly constrictive.

“I don’t think the door is slammed. I think it’s slightly ajar,” said James Ballentine, a lobbyist for the American Bankers Association. “I wouldn’t say it’s wide open, but it’s slightly ajar.”

Congress and the White House averted a government shutdown at the end of 2014 with a funding bill that included language scrapping some Dodd-Frank provisions restricting how banks can trade in financial derivatives.

At the outset of the new Congress this month, the president also signed a bill providing more carve-outs for derivatives as part of a bill reauthorizing federal terrorism insurance.

But while both measures passed with Democratic support, liberals led by Sen. Elizabeth Warren (D-Mass.) protested vehemently, decrying the efforts to roll back parts of Dodd-Frank in pieces of critical legislation.

The protests appeared to have caught the attention of the president, who said Tuesday in his State of the Union address that if the GOP-led Congress sent him any bills “unraveling the new rules on Wall Street … it will earn my veto.”

Obama is also pushing for a new tax on the nation’s largest financial institutions in a bid to curb excessive risk-taking.

Together, those moves suggest that, rather than loosening his grip on Wall Street, the president could be preparing to deal with new GOP majorities in Congress by doubling down on tougher rules.

One senior financial industry executive said when it comes to the financial sector, it’s impossible to discount “the Warren effect,” and wondered how long her push to resist any changes to Dodd-Frank will hold sway with colleagues.

“She’s proven that she can near singlehandedly hijack the direction of the Democratic Caucus,” the executive said. “It remains to be seen if this is going to last for a year, two years, or in perpetuity.”

Industry advocates were skeptical that Wall Street relief would be coming via mandatory legislation, as it did with the “cromnibus.” For one, GOP leaders in the Senate have vowed a return to regular order that allows up-or-down votes on amendments.

Furthermore, there simply aren’t that many bills Obama would feel obligated to sign. The only “must-pass” bills likely to be on the docket in 2015 are a government funding measure and legislation to deal with the debt limit. Both bills are months away.

Tactically, the GOP has two options: seek small changes to Dodd-Frank that could receive bipartisan backing, or go broad in hopes that Democratic opposition will set the stage for the 2016 election.  

Republicans would surely face Democratic resistance for some of their preferred changes, like overhauling the Consumer Financial Protection Bureau that Warren helped build.

But they insist Democrats will be open to some changes, and are hopeful that support will convince the White House to go along.

 The most recent Dodd-Frank changes enacted both enjoyed bipartisan support, as 35 Democrats voted earlier this month in favor of a package of bills making several revisions to the law. The White House threatened to veto the measure, saying it would “weaken and undermine” the law.

“These are bipartisan, targeted reforms,” said Rep. Mike Fitzpatrick (R-Pa.), a sponsor of the measure.

Some Democrats have expressed interest in reworking the Financial Stability Oversight Council, a panel of top financial regulators, amid complaints from Republicans and the industry that its work lacks transparency. 

Sources suggest lawmakers could agree to look at whether regulations are preventing people from obtaining mortgages, or perhaps providing community banks with relief from some of the new regulations.

 But even centrist Democrats who have backed revisiting Dodd-Frank in the past say they have more pressing matters to focus on. 

Rep. John Delaney (D-Md.) said lawmakers should direct their energy toward housing finance reform, while Rep. Jim Himes (D-Conn.) said there were a host of issues, such as immigration, education and terrorism, that would be a better use of resources.

 “There are no obvious car wrecks in Dodd-Frank right now,” Himes said. “Unless you have an obvious car wreck … there are probably higher priorities right now.”