WASHINGTON (Reuters) - Republican lawmakers vowed to vigorously oversee the new financial reform law but stopped short of promising major changes to the legislation they have described as "job killing."
Following their election victory Tuesday night, taking the House of Representatives from Democrats, Republicans were quick to say they would seek to repeal President Obama's signature healthcare bill and challenge him on spending.
But they took a more cautious approach to the most sweeping oversight of financial markets since the Great Depression.
With Democrats still controlling the Senate after Tuesday's elections, any major legislative changes would likely fall flat, even before facing a veto threat from the White House.
The bill is "going to require a significant amount of oversight, so ... the American people will understand just what this bill will do to our financial services industry," said House Republican leader John Boehner said on Wednesday. Boehner is expected to get the top job of House Speaker in January.
Lawmakers said some changes to the law would likely be attempted in the areas of derivatives regulation, credit rating agency liability and the setup of the Consumer Financial Protection Bureau, which will be funded by the Federal Reserve and not through congressional appropriations.
But Senator Jack Reed, a senior Democrat on the Senate Banking Committee, said: "We are not going to let Republicans gut important measures designed to prevent a repeat of the financial crisis."
Republicans would have more power to gut the new consumer watchdog if its funding was subject to congressional approval.
"The legislature should always control the purse strings," said Republican Representative Spencer Bachus, in line to become chairman of the House Financial Services Committee but facing competition from Republican colleague Ed Royce.
Bachus said he would conduct "vigorous oversight" of financial regulators writing hundreds of new rules to carry out the reform law. "We're going to call people to account for their actions," he said in an interview.
Such tactics can pressure regulators to soften their rules. In 2009, the Financial Services Committee managed to get U.S. accounting rulemakers to relax a standard that forced banks to write down billions of dollars in mortgage-backed securities.
Representative Scott Garrett, a senior Republican on the committee, said regulators are moving, "in some cases too quickly," to write new rules under the financial legislation.
Garrett said the best chance of influencing that process is through oversight hearings while Republicans decide what legislation they want to move.
DERIVATIVE TWEAK, NOT REPEAL
Bachus also wants to tweak one of the most controversial parts of the legislation -- new rules for the $615 trillion over-the-counter derivatives market.
Under the Dodd-Frank law, the Securities and Exchange Commission and Commodity Futures Trading Commission must write rules to force most private derivative contracts onto exchanges and through clearinghouses.
The goal is to give regulators a view of the market and ensure that the opaque financial products do not pose a risk to the wider economy.
But Democrats are confident they can thwart any Republican attempt to change the law and have promised to hold hearings of their own in the Senate where Democrat Tim Johnson is expected to head the Senate Banking Committee.
"I am willing to consider changes where there is consensus, but I don't see the votes in place for any wide-ranging repeal or reductions in transparency of this critically important market," Johnson said.
A type of derivative known as a credit default swap nearly toppled insurer American International Group and forced the federal government to use billions of dollars in taxpayer funds to prop up the company.
Even without changes to the law, analysts said they saw the election as a gain for banks and other financial services companies, who are unlikely to see any further legislative crackdowns and can now focus on implementation.
The KBW Bank Index closed up nearly 2 percent on Wednesday, while the Dow Jones industrial average closed up 0.24 percent.
Supporters of the law said Republicans' emphasis on oversight rather than repeal reflects the law's relative popularity with the public. "There is in fact popular support for holding Wall Street accountable," said Lisa Donner, executive director of Americans for Financial Reform.
Wall Street executives did not expect the election to lead to major changes to the law and have been focusing on how the agencies put it into practice.
"I think it will be affected around the edges as the rules get written, but I don't think it's practical to think the whole financial regulatory Dodd-Frank rule is going to get reversed," BNY Mellon Wealth Management Chief Executive Lawrence Hughes said at the Reuters Wealth Management Summit.