Could Republicans gut parts of Wall St reform law?

Senator Richard Shelby (R-AL) speaks at the Reuters Washington Summit in Washington September 20, 2010.

WASHINGTON (Reuters) - Republicans want to roll back the landmark Wall Street reforms enacted in July but tinkering around the edges may be all they can manage, even if they do make gains in the U.S. congressional election in November.

Analysts see little to no chance of a full dismantling of the law meant to prevent a repeat of the 2007-2008 financial crisis that set off the worst U.S. recession in generations.

But Republicans are targeting specific provisions of the reforms, such as funding for the new consumer watchdog. On such narrow issues, they might get some traction, analysts said.

The congressional oversight process, about to get going as regulators gear up for implementation, may lead to substantive tweaks to the complicated Dodd-Frank financial regulation law. As ever, bank lobbyists will be busy behind the scenes.

Here is a question-and-answer discussion of the issue:

HOW DETERMINED ARE REPUBLICANS ON DODD-FRANK?

Three senior Republican senators -- Richard Shelby, Lamar Alexander and Judd Gregg (who is retiring) -- told Reuters last month that making changes to the law will be a top priority after the congressional election on November 2.

John Boehner, the Republican leader in the House of Representatives, has sharply criticized Dodd-Frank and said he wants to repeal it. The law is named for Senator Chris Dodd (who is also retiring) and Representative Barney Frank, both Democrats.

WHAT COULD STOP A FULL REPUBLICAN ROLLBACK?

Even if voters decide next month to send more Republicans to Congress, President Barack Obama is not going anywhere and his veto would likely block any attempt to gut the law.

Even if Republicans win a majority in the House, most analysts expect the Senate to remain under Democratic control, impeding any Republican effort to trash Dodd-Frank.

Regulators are under heavy pressure to clamp down on the financial industry that needed more than $1 trillion in government help in 2008 after years of reckless risk-taking.

But Wall Street banks are already taking steps to scale back betting with their own money in the hopes of staving off more draconian curbs.

"Banks are trying to move ahead of the regulations so they can shape the regulations themselves," said Paul Argenti, a corporate communication professor at Tuck School of Business.

WHAT ABOUT THE CONSUMER WATCHDOG?

The new Consumer Financial Protection Bureau, as designed under Dodd-Frank, will be an independent unit inside the Federal Reserve, the U.S. central bank. Among its chief missions will be regulating mortgages and credit cards.

Under the law, the Fed will fund the watchdog directly. But some Republicans want to force the consumer bureau to request funding each year from Congress through the appropriations process, giving lawmakers more influence over its scope.

Consumer advocates and other backers of the watchdog fear such a change would make the bureau a political football.

WHAT ARE OTHER TARGETS IN DODD-FRANK?

Early next year, the Fed must write rules for implementing three key parts of Dodd-Frank:

-- the Volcker rule limiting proprietary trading by banks

-- a rule limiting banks' ability to count trust-preferred securities as Tier One capital

-- new limits on debit card transaction fees.

"We would expect Republican-run committees in either chamber to hold many more oversight hearings on these rule-makings as Republicans try to moderate these proposals," said Concept Capital analysts Chris Krueger and Jaret Seiberg.

Dodd-Frank also called for new rules for credit rating agencies such as Moody's Corp and Standard & Poor's, leaving much latitude to regulators on the issue.

Republicans may push for new curbs on credit rating requirements in federal regulations but resist exposing the agencies to more legal liability, analysts said.

WHAT ABOUT HOUSING FINANCE REFORM?

A gaping hole in Dodd-Frank was its failure to fix the housing finance system in general and mortgage giants Fannie Mae and Freddie Mac in particular. Both are known as government-sponsored enterprises, or GSEs.

Lawmakers from both parties vow to address the GSE issue.

Look for more congressional hearings on Fannie and Freddie, with Republicans pushing to minimize government involvement in the sector and Democrats defending some continued form of government mortgage guarantees.

FBR Capital Markets said in a report that housing finance reform could take two years to complete, flagging as important a Treasury Department report expected in December.

"If Republicans win a majority in the House ... GSE reform will be a top agenda item. We would be expecting an initial draft from House Republicans that would seek to offer as much of a private market solution as possible," FBR said.

(Reporting by Kevin Drawbaugh; Editing by John O'Callaghan)