RENEE MONTAGNE, host:
And that lawsuit against Goldman Sachs, along with widespread anger with many Wall Street firms, comes at a time when the Senate is weighing a new financial regulation bill. Democrats hope this anti-Wall Street sentiment will help them win approval for the bill, but Republicans dont see it that way.
NPR's Audie Cornish reports.
AUDIE CORNISH: The financial regulatory bill is long and complicated, but Democrats often portray it in simple terms of good and evil. Just listen to Senate Majority Leader Harry Reid.
Representative HARRY REID (Democrat, Nevada; Senate Majority Leader): It's a good bill. I support it because I support transparency, accountability and economic security. Those opposed to it favor secrecy, irresponsibility and reckless risk-taking.
CORNISH: The news that the Securities and Exchange Commission is suing Goldman Sachs is just the latest opportunity to pile on that message. Senate banking chief Chris Dodd said the accusation against Goldman will make it harder and harder for Republicans to justify their opposition.
Senator CHRIS DODD (Democrat, Connecticut): Let there be no doubt in my mind: Our bill would have prevented that kind of an event from happening, in my view. And that's what the public needs to know. By not enacting our legislation, by filibustering it, stopping it, we leave the American public vulnerable once again to the kind of - the kind of shenanigans that have occurred in our large financial institutions across this country.
CORNISH: The SEC claims that Goldman misled investors about the riskiness of the mortgage-backed financial products it produced with the help of a hedge fund manager who was allegedly betting against those same products. Goldman Sachs calls these allegations unfounded. And so far, it's not clear whether the company actually did anything illegal.
Professor DARELL DUFFIE (Stanford University): I still have concerns over whether that allegation is correct or not.
CORNISH: This is Darell Duffie, a finance professor at Stanford University.
Prof. DUFFIE: But I don't see how the legislation, however valuable the legislation is, is going to address this particular problem. If a bank misleads its clients, it's always been liable and it will continue to be liable in the future.
CORNISH: But Douglas Elliott, a former investment banker who's now a fellow at the Brookings Institution, says some provisions in the bill could have made the situation with Goldman Sachs less likely to occur. He points to Senate proposals to regulate these kinds of financial products and add more transparency to the deals.
Elliott says another provision that might have made a difference would force firms who produce and sell such securities to keep a percentage of the risk.
Whether the SEC is successful or not, Elliott says Democrats benefit from the filing of the Goldman suit last week.
Mr. DOUGLAS ELLIOTT (Brookings Institution): Public anger is the main political thing that's going to drive this forward. The public really wants something to be done. And with them being angrier at Goldman Sachs, there's even more political momentum than there was on Thursday, when they only somewhat hated Goldman Sachs.
CORNISH: But Republicans show no sign of backing down their opposition to the current bill - nor should they, says New Hampshire's GOP Senator Judd Gregg.
Senator JUDD GREGG (Republican, New Hampshire): That should not cause us to legislate based on hyperbole and populist pandering. We should legislate based on what's going to be best for the financial services industry and for Main Street, which depends on a strong financial services industry to get credit.
CORNISH: Gregg is among those senators that Democrats have hoped would break ranks and support the bill. The Obama administration has reached out to other potential swing votes, such as Susan Collins of Maine and George Voinovich of Ohio. But so far, all three have said they will vote against the start of debate this week, in the hopes of pushing for a bipartisan bill.
Audie Cornish, NPR News, the Capitol.