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Can Wall St. mend its rift with President Obama?

(Moneywatch) Mitt Romney wasn't the only loser in the presidential election. Wall Street's banks and investment firms raised a lot of money for the Republican nominee to no avail. Will they try to mend fences with President Obama and a Democrat-controlled Senate which will soon include Elizabeth Warren, nemesis of big banks?

Almost as soon as the election was declared for Mr. Obama, The Securities Industry and Financial Markets Association -- which has lobbied and sued to overturn the Dodd-Frank bill -- came out with an oddly conciliatory statement:

"We look forward to continuing to work with President Obama and a new Congress on a host of important and immediate issues. With the election now over, it is vital that we return to the work at hand, namely, the continued implementation of Dodd-Frank and addressing the fiscal cliff."

Nice words alone are unlikely to be enough to make-up for the huge amount Wall Street gave to defeat the president. The financial services sector donated $61 million to Gov. Romney's campaign, more than three times as much as it gave to President Obama, according to the Center for Responsive Politics. How much damage did all that money do?

"It did less damage than did the crisis of 2007/08, but it did do some damage," says Paul Kedrosky, a venture capitalist who writes the respected blog Infectious Greed. "Wall Street hoped it could squirm out from under Dodd-Frank and related regulations under a Romney administration, so they acted in a transparently self-serving way that will limit its flexibility in any future conversations."

Obama Slams "Fat Cat Bankers"

While the president's less-than-respectful attitude rankled executives at the big banks -- he famously referred to them as "fat-cat bankers" -- it is more likely his policies that spurred their donations. For one thing, they were hoping to protect the tax maneuver that allows private equity and hedge fund investors to pay lower capital gains taxes on rich performance fees as opposed to higher ordinary income tax rates that most people pay on salary.

Indeed Wall Street may not be interested in reconciliation.

"I don't think it changes very much because the ground game for Wall Street has been and will continue to be dismantling Dodd-Frank piece by piece through the judicial process," says Josh Brown, an advisor at Fusion Analytics and author of the book "Backstage Wall Street." "Used to be you pass a regulation and that's the rule. Now it's you pass the regulation and it's the beginning of a court battle/negotiation process. So they're going to continue to try to gut various parts of the reform piece by piece."

Dodd-Frank left the actual rule-making up to regulators, and financial firms will continue to lobby to water down the law. To keep up with the latest changes to the rules, you can check updates published by Davis Polk, a white shoe firm that is one of the big guns in securities law.

Both Kedrosky and Brown say Wall Street may be more focused on the new junior senator from Massachusetts, Elizabeth Warren, than they are on the White House.

"She's really the worst nightmare for Wall Street," says Brown. "Her ideas about consumer protection and regulation go far beyond anything coming out of the White House."

Warren is the Harvard professor who was instrumental in creating the Consumer Financial Protection Bureau. The banks lobbied hard (and successfully) to prevent her from becoming head of the CFPB. As a freshman senator Warren won't wield much direct clout but she will add another voice, and vote, against watering-down Dodd-Frank. Further, her deep knowledge of banking could be called on by the Democratic leadership to fight back against Wall Street.

If she is named to the Senate Banking Committee, which seems a natural fit, bankers can expect a far less cordial greeting on the Hill than they have gotten previously. When JPMorgan CEO Jamie Dimon spoke before the committee earlier this year every member addressed him by his first name. That, at the very least, can be expected to change if Warren is on board.

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