(Bloomberg News) Republicans in the U.S. Congress were uniting behind a call to repeal all or part of the 2010 financial regulatory overhaul. Since JPMorgan Chase & Co. announced its $2 billion trading loss earlier this month, that front has splintered.

Some are seeking investigations, with Senator Mike Crapo of Idaho among those calling on JPMorgan Chairman and Chief Executive Officer Jamie Dimon to testify, which he has agreed to do. Senator Richard Shelby of Alabama, the Banking Committee's top Republican, said the loss emphasizes the need for capital standards for banks tougher than what the overhaul requires. Senator Lamar Alexander of Tennessee says Congress has no business getting involved.

The divisions point to a party torn by instincts to fix problems as significant as the losses suffered by one of the nation's biggest banks, by a Tea Party-backed faction that seeks to avoid any prospect of future bailouts, and by presumptive Republican nominee Mitt Romney's stance that one bank's loss was another investor's gain.

"We need to get over the idea that every time a bank fails or has a problem that Washington's job is to bail it out or fix it," Alexander said.

Suspicious of Banks

Congressional Republicans may not be able to resolve their differences on this issue, said Michael Franc, vice president of government relations at the Heritage Foundation, a Washington- based research group that favors small government. While most Republican lawmakers oppose strict regulation, more are becoming as suspicious of big banks as they are of big government, he said.

"One of the dynamics that's emerged in the Republican Party over the last decade or so is a growing populist feel," he said.

As Republican lawmakers split over their response to the JPMorgan loss, Democrats are unified on their message: that the trading loss underscores the need for tougher regulation of banks.

"It's one of those things that's clear that they were betting like you would do at the craps table in Las Vegas and they bet the wrong way," Senate Majority Leader Harry Reid, a Nevada Democrat, said of the company's loss this week. "That's fine if they did it with their own money, but the problem is, the way Wall Street's been working, is that heads they win, tails we lose."

'JPMorgan Loophole'

Senators Carl Levin of Michigan and Jeff Merkley of Oregon, the two Democrats who drafted the ban on proprietary trading included in the Dodd-Frank Act, are increasing pressure on regulators to tighten the so-called Volcker rule, which they say has a "JPMorgan loophole."

"Last fall's proposed rule ignored the clear legislative language and clear statement of congressional intent and allowed for so-called 'portfolio hedging,'" the lawmakers wrote in a letter yesterday to the five federal regulators drafting the rule. "Now, in recent days, we've seen exactly what 'portfolio hedging' might mean."

Dimon, who disclosed the loss May 10, told shareholders there was no justification for the "egregious mistakes" by the biggest and most profitable U.S. bank. In two lawsuits filed this week in Manhattan federal court, shareholders sued the bank and Dimon over the loss. He agreed yesterday to testify before the Senate Banking Committee as it concludes hearings on regulatory changes in June.

'Way America Works'

Days after the bank's loss was disclosed, Romney weighed in. The former Massachusetts governor said business losses are part of "the way America works" and urged caution in adopting new rules in response.

"I would not rush to pass new legislation or new regulation," Romney said.

The matter puts Republicans in the position of deciding whether to take action that will affect an industry that is a top donor to the party. Congressional Republicans are campaigning, with the election less than six months away, to keep control of the House and win a majority in the Senate now governed by Democrats, 53-47.

Campaign contributions from the banking industry were almost evenly split in the 2008 presidential election year, when Republicans reaped 54 percent of industry donations, according to the nonpartisan Center for Responsive Politics, a Washington group that tracks the influence of money on politics. That improved for Republicans in 2010 as they sought to win control of the U.S. House. In the 2010 election cycle, commercial banks donated $9 million to federal candidates, 61 percent of which went to Republicans.

PAC Contributions

JPMorgan's political action committees donated $829,000 to candidates, parties and political action committees between Jan. 1, 2011, and March 31, 2012, up from $459,000 in that period two years earlier, Federal Election Commission records show. Republican candidates have received 57 percent of the company's donations in this election cycle, compared with 43 percent for Democrats.

Since the announcement of the loss, Republican lawmakers have moved in different directions, with most calling for a closer examination of what happened before tightening rules.

"You have to get all the facts on the table," said Senator Johnny Isakson, a Georgia Republican. "We've passed a plethora of laws and regulations. I think we let it settle out before we overreact."

Representative Tom Cole, an Oklahoma Republican, said he favors hearings "to make sure there is not a culture and attitude that is threatening the stability of the entire system."

Tougher Capital Standards

Meanwhile, a few congressional Republicans, including Shelby, are making the case that tougher capital standards are needed beyond what is in the Dodd-Frank regulatory overhaul.

"I would certainly be in favor of starting to raise capital requirements to make sure banks are secure," said Senator Ron Johnson, a Wisconsin Republican. "Then the taxpayer won't have to back it up."

He said that doesn't mean the government should break up big banks. "If the markets determine that's the best way to go, that's fine," Johnson said.

Others are urging the government not to get involved, particularly because JPMorgan's solvency isn't in question.

"Nobody has said that what happened created any kind of a risk that bank couldn't handle," said Senator Saxby Chambliss, a Georgia Republican, who said regulators can handle the matter with the tools they have. "The CEO had to respond to shareholders. There was no tax money at risk."

Brown's Letter

One Republican seeking re-election this fall has struck out on his own path. Senator Scott Brown, a Massachusetts Republican, sent a letter to Dimon this week, telling him he should "impose financial penalties" on employees responsible for the trading loss.

"It has been very frustrating to watch the continuing volatility in our financial markets, and this $2 billion loss, while painful, provides a good opportunity for JPMorgan to prove that compensation practices have truly changed since the 2008 financial crisis," Brown wrote to Dimon in a letter dated yesterday.

Brown, one of three Senate Republicans who voted in favor of the 2010 financial regulatory law, is seeking re-election in a close race against the presumed Democratic nominee, Elizabeth Warren, who advised President Barack Obama in setting up the Consumer Financial Protection Bureau.

'Big Financial Scandal'

The differing responses among Republicans suggests that there may not be enough votes in Congress to make any big changes to the regulatory overhaul. Jaret Seiberg, a senior policy analyst at Guggenheim Securities' Washington Research Group, said it may take one more "big financial scandal" to galvanize Republicans around the notion of breaking up big banks.

"When push comes to shove, the risk here is that you give momentum to the break-up-the-bank faction," he said.

Cole said Republicans were slow to discuss the JPMorgan trading losses because "we're obviously not for Dodd-Frank; most of us voted against it."

Still, he said, "people in both parties have been cautious about commenting, in part, nobody knows if there is another shoe to drop out there. It caught people by surprise."