With most polls predicting large gains by the Republican Party in next week’s mid-term elections, including a possible majority in the House of Representatives, the talk is already turning to what the GOP will do with their new political capital.

President Obama, for his part, is out on the stump warning voters that the GOP might repeal the recently-enacted Wall Street reform bill that gave the government the ability to break up companies, regulate consumer banks and bring shadow financial markets into the fold of government oversight.

In last Saturday’s weekly radio address, the President called any repeal of the reform bill a “terrible mistake."

“Our economy depends on a financial system in which everyone competes on a level playing field, and everyone is held to the same rules — whether you’re a big bank, a small business owner, or a family looking to buy a house or open a credit card,” said Obama."And as we saw, without sound oversight and common-sense protections for consumers, the whole economy was put in jeopardy."

For its part, the GOP claims the bill was poorly written and it gives the federal government too much power over the nation’s financial institutions. Specifically, a key GOP talking point on the campaign trail is that financial reform allows the government to use taxpayer funds to bail out toxic banks and investment firms.

But if the GOP does take over, what exactly does that mean for Wall Street reform? Is the President right? Or do Republicans have a point? Surely, banks, credit card firms, and consumers all want to know.

Here are some things to consider:

Republicans have been railing against a few key provisions in the financial reform bill, including:

  • Checks and limits on proprietary trading at banks (the “Volcker rule”).
  • Limits on debit card transactions: Small government advocates hate it when the government tells private businesses what they can and cannot charge for products and services.
  • The housing mess: Republicans may either try to eliminate Fannie Mae (Stock Quote: FNM) or Freddie Mac (Stock Quote: FRE), or both, and blow up the entire government-sponsored enterprise (GSE) mortgage lending model. Expect a lot of hearings on this issue if the GOP takes over Congress.

A Republican majority in the House might try to “defund” reform efforts, withholding the financial resources needed for mandated rules and programs linked to the bill. For example, a GOP-led House could vote not to fund the new Consumer Protection Financial Bureau. Or it could appoint directors and staffers to the new agency who are friendlier to Republican interests.

But the GOP is serious about repealing financial reform overall. Senior legislators like Sens. Richard Shelby (R-Ala.) and Lamar Alexander (R-Tenn.), and House Speaker-to-be (if the GOP wins) John Boehner (R-Ohio) have all come out with public statements about changing the law.

Can the Democrats do anything to stop any repeal effort? Well, don't forget that the President, devoid of a huge electoral tsunami next Tuesday, will still have enough votes in the Senate to block any full repeal effort. The GOP will likely fall short of enough votes (67 in the Senate, 290 in the House) to overturn any presidential veto.

Nothing is ever etched in stone in Washington, aside from the numerous monuments that dot the city landscape. But if the Republican Party does take the reins in D.C. expect some severe pushback on financial reform in 2011.

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