BREAKINGVIEWS-Next Republican generation poses risk for banks

-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

By James Pethokoukis

WASHINGTON Feb 8 (Reuters Breakingviews) - Sarah Palin's "Tea Party" speech in Tennessee at the weekend should worry Wall Street. Her words were as much anti-Big Money as anti-Big Government. And they reflected a Republican wave that goes beyond the party's fringes. Banks hoping an influx of GOP lawmakers will dilute reform may need to think again.

The industry can be forgiven for thinking congressional gridlock after November's midterm elections might be good. Bank executives, many big donors to the Democrats, are a bit shocked that the Obama administration's approach to bailed-out banks has grown teeth in 2010. The White House is pushing a bank tax, as well as limits on size and trading activities.

Traditionally, more Republicans in Congress would be good for Wall Street. The GOP has, for instance, worked tirelessly to neuter a proposed new consumer finance regulator. It's no wonder that some Republican leaders have been begging banks for more campaign cash.

But Palin possesses uncanny political radar. Speaking to the small-government, fiscally-responsible Tea Partiers, she didn't blame the Federal Reserve or U.S. housing policy for the financial crisis. She blamed the bankers. Then she attacked their big bonuses. The $700 billion bank bailout? To Palin, that was nothing but crony capitalism. The crowd went wild.

Palin says she wants Republicans to fully absorb the grassroots Tea Party movement. Many aspiring candidates are employing anti-bank rhetoric as they seek the group's support. Even looking beyond the oddballs in Tennessee, outside Washington there's little right-wing love for Wall Street. Leading conservative intellectuals wonder aloud about the finance sector's toxic influence on politics and policy. Right-wing bloggers even embraced a bank break-up bill authored by the socialist U.S. senator from Vermont.

Both Democrats and Republicans are up for election in November. If unemployment stays high, bank-bashing will continue to seem politically attractive. And that would mean that no matter who is in charge, Congress will only grow more hostile toward bankers. They shouldn't bank on the Republicans to rescue them from regulation.

CONTEXT NEWS

-- Sarah Palin spoke at a national convention of the "Tea Party" movement in Tennessee on Feb. 6, taking aim at President Barack Obama on everything from big government to teleprompters. "I believe in this movement ... America is ready for another revolution," said Palin, former Alaska governor and Republican John McCain's running mate in the 2008 election won by Obama.

-- The Nashville convention brought together hundreds of activists from the Tea Party group, which hopes to make a splash in November's congressional elections and beyond.

-- The three-day event was plagued by infighting, withdrawals and criticism of tickets costing more than $500.

-- The movement takes its name from the historic protest against British taxation, the Boston Tea Party, one of the triggers of the American revolution against colonial rule.

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(Editing by Richard Beales and Martin Langfield)