WASHINGTON — Goldman Sachs is proving to be a convenient, timely weapon for Democrats eager to push a financial regulatory overhaul through a reluctant Senate.
Republicans say Democrats are late-day converts as Goldman skeptics, noting that Majority Leader Harry Reid, D-Nev., raised money in January at a New York fundraiser attended mostly by Goldman executives.
Since the Securities and Exchange Commission charged the firm last week with civil fraud, Democrats have claimed important momentum is gathering behind the legislation.
"People back home may not understand the nuances, but they know something's not quite square," said Sen. Tom Harkin, D-Iowa.
The Democratic National Committee has launched an ad criticizing Republicans for being too cozy with Wall Street, and Senate Banking Committee Chairman Christopher Dodd, D-Conn., insisted that his bill would help stop practices such as those that Goldman is charged with.
Reid has led the charge, but when asked Tuesday about the fundraiser, he said, "Everything we have done in this legislation is about as transparent as it can be." Peppered with further questions at a news conference, he turned and walked away.
In January, Goldman Sachs executives set up the fundraiser for Reid, who is in a tight re-election fight, at a lower Manhattan restaurant. The breakfast raised $37,000, but the executives reportedly got angry at Reid for trying to score political points at their expense.
The SEC accuses Goldman of failing to disclose to investors that hedge fund mogul John Paulson helped select components of a complex financial deal that he was betting would default. It did, and Paulson picked up $1 billion.
Goldman has denied any wrongdoing.
Dodd said Tuesday that his pending legislation would have helped rein in the firm.
"Goldman would have a regulator now," he said.
However, Senate Republican Whip Jon Kyl, R-Ariz., argued that such firms are already regulated.
"Things go wrong, and the Securities and Exchange Commission has the ability to go after them."
At the time the alleged incidents occurred, Goldman was an investment bank, subject only to SEC scrutiny and not bank regulation. The SEC's mission is to protect investors, however, and its chief tools are its requirements for disclosure.
Today Goldman is a bank holding company subject to regulation by the Federal Reserve. Dodd's bill would keep the Fed in charge of supervising large bank holding companies and would make it easier for the public or regulators to see and perhaps police riskier investments.
A controversial portion of his bill would force firms such as Goldman Sachs to divest themselves of their lucrative proprietary trading operations — where they trade on their own behalf, not for clients — on the belief that such trading conflicts with their duty to do what's best for customers who pay them to trade on their behalf.
Senators from both parties are continuing private talks on a compromise bill. The Senate Agriculture Committee is scheduled to meet Wednesday to consider putting tough controls on derivatives, the complex financial instruments that helped cause the 2008 global financial crisis.
Chairing the committee is Sen. Blanche Lincoln, D-Ark., who has a difficult re-election fight, as well as a challenge in her state's primary May 18. Lincoln, who needs support from liberals, is trying to emerge as their champion on this measure.
Once the committee finishes its work, probably late Wednesday, its provisions will be combined with Dodd's into a massive overhaul bill. Debate on that could begin as soon as this week.
Some Republicans acknowledge the public mood makes it risky to defend banks.
"Goldman Sachs is another example of what went awry," said Sen. Olympia Snowe, R-Maine, one of the GOP senators Democrats are counting on to support their legislation.
Others, however, are angry that they're being painted as villains.
"Wasn't it the president who raised over $1 million from Goldman Sachs?" asked Kyl, citing an accurate figure of how much Goldman employees contributed to Obama's presidential campaign.
Harkin said that the legislative fight doesn't have to be a partisan war.
"We need to focus on tomorrow, not yesterday," he said. "There's a lot of blame to go around."
(Kevin G. Hall contributed to this article.)
ON THE WEB:
MORE FROM MCCLATCHY:
For more McClatchy politics coverage visit Planet Washington