"We're headed for a big Republican election," says Stuart Rothenberg, publisher of the nonpartisan Rothenberg Political Report. With the country pessimistic about the jobless recovery and health care reform, he sees Democrats losing at least two dozen House seats in November.

Goldman CEO Lloyd Blankfein was defiant in his appearance before a Senate subcommittee that's probing the firm's disclosures to clients on the other side of Goldman's lucrative trades. Where senators saw gambling for huge profits, Blankfein saw prudent hedging against risk.

In testimony before a Senate subcommittee Tuesday, Goldman Sachs CEO Lloyd Blankfein defended his firm against SEC charges of fraud involving mortgage-backed securities. He said: Goldman "didn't have a massive short against the housing market and we certainly did not bet against our clients."

Republicans have stopped a U.S. Senate bill aimed at reforming banking industry regulation from moving forward. Proponents of legislation that would reduce risk in the banking system and increase consumer protections will now have to draft a new bill that can garner the 60 votes needed.

Despite denials from Goldman Sachs, Senator Carl Levin says that evidence gathered by a Senate subcommittee shows that the company was making short-sale bets against the mortgage-backed securities Goldman sold to investors in 2006 and 2007.

Not surprisingly, some big banks aren't happy with the president calling for their support of his financial reform. One lobbyist complains that Obama "demagogued the industry" in his quest for new regulations. Some voices were more conciliatory.

The feds's $700 billion bailout program has helped big banks but hasn't done much for the little guy, a key government official said Tuesday. Long-term unemployment remains at the highest rates in memory and this year's foreclosures are expected to eclipse the 2.8 million in 2009.

End of an era? Rep. Sander Levin, the new chairman of the House committee responsible for U.S. tax law, predicts the Bush tax cuts for the wealthiest Americans will expire. But the Michigan Democrat says tax cuts for middle income families will likely remain in place.

With the Senate preparing to take up major financial reform legislation this week, Senate Banking Committee Chairman Christopher Dodd called on Republicans to join in supporting the major regulatory overhaul. "This comes right down to this basic fact," said Dodd. "Whose side are you on?"

Agency infighting and regulators' disregard of shoddy lending practices allowed Washington Mutual Bank, which failed in 2008, to continue to make high-risk mortgage loans and sell them as securities into the market, a Senate investigative subcommittee reported Friday.