SEC suit against Goldman Sachs provokes political firestorm 

Allegations the White House may have colluded with the Securities and Exchange Commission began unraveling soon after they were made in a bizarre sideshow to the financial overhaul saga.

Rep. Darrell Issa, a California Republican and ranking member of the House Oversight and Government Reform Committee, was winning few co-signers for his probe of whether the SEC's lawsuit against Goldman Sachs was politically timed to help President Obama.

And concurrently, Republican efforts to derail the administration's reform package also looked in danger as bipartisan Senate negotiators indicated they are close to a compromise on the bill.

Even so, the seriousness of the claim underscores the highly politicized atmospherics of the financial regulatory reform bill -- a key legislative priority for Obama.

"Republicans have a reputation for being the rich, Wall Street types," said Susan MacManus, a political scientist at the University of South Florida. "By making these kinds of allegations, Republicans show that type exists in both parties."

But MacManus said the result could be that heated accusations by both sides reinforce for voters the idea that both parties are corrupt and that "Washington is broken."

Both the SEC and the Obama administration denied any coordination behind the timing of the lawsuit against Goldman Sachs and the White House push for the reform bill. Among other things, the fraud case has brought more attention to the need to reform Wall Street, backers say.

"Republican politicians should stick with things they know -- such as death committees in the health care bill," said James Cox, a Duke University law professor and expert on securities law.

Cox was among those taking a dim view of Issa's claim that a series of coincidences pointed to a possible conspiracy between the White House and the SEC, noting that the case against Goldman was developed over 20 months and included millions of documents.

At the same time, Sen. Judd Gregg, R-N.H., told Fox News that the Goldman case was a distraction that could hamper a sober overhaul of the financial services industry.

"The danger is that you legislate on the basis of an anecdotal event," Gregg said. "And I believe very strongly that these issues, which are really complex and really do require thoughtful and mature approaches, should not be legislated in an atmosphere of hyperbole."

Senate negotiators were closing in on the thornier points of the bill -- including regulation of the derivatives market and creation of a new consumer protection agency. But overall, both parties were sounding more optimistic about prospects for a deal.

That tone marks a significant shift from recent days, when the debate centered on the role Goldman and other financial sector giants played in financing Democratic politicians, and whether Republicans were stalling reform to aid their own supporters in the industry.

Issa, meanwhile, was pressing his demand for information on the timing of the Goldman suit, noting that Democrats seized on the issue as a fundraising tool, and asking if any elected officials learned of the case before it was filed.

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