Contributions from Goldman Sachs Group Inc. employees threaten to become toxic campaign assets for both political parties facing elections this year.

“It’s going to be hard for Democrats to make the accusation about Republicans because the president raised so much Goldman Sachs money,” said John Feehery, a Republican political strategist who advised former House Speaker Dennis Hastert.

Donations from the bank’s employees became an issue when U.S. Senate candidate Alexi Giannoulias pushed his Republican opponent in Illinois to return such contributions after the Securities and Exchange Commission filed a fraud lawsuit April 16 against Goldman Sachs.

Giannoulias said the money sent to the campaign of his opponent, Republican congressman Mark Kirk, is “tainted,” without saying whether President Barack Obama should return almost $1 million that bank employees contributed to his White House bid.

“Goldman Sachs employees tend to have a lot of money that they can give to politicians,” Feehery said. “They are very good at reading the marketplace.”

Obama and Democrats in Congress are proposing the most sweeping financial regulation since the Great Depression. The personal push by the president, who plans to deliver a speech on the subject on April 22 at the Cooper Union in New York, comes as Goldman reported its net income almost doubled in the first quarter.

California Cash

Obama, 48, a political mentor and basketball buddy to Giannoulias, received the money from employees and their family members, making Goldman Sachs second only to the University of California as his biggest single source for donors in 2007 and 2008, according to the Center for Responsive Politics.

Kirk, competing against Giannoulias for the seat once held by Obama, ranks sixth for donations from Goldman employees, the center’s data shows. The top five are Democratic Congressman Michael McMahon of New York, Republican Senator Richard Shelby of Alabama, and three other New York Democrats: Senator Kirsten Gillibrand, Representative Scott Murphy and Senator Charles Schumer.

Gillibrand, 43, will wait to see whether Goldman loses its case, said Matt Canter, a spokesman.

“It is long-standing practice for the Gillibrand campaign that if any contributor is found guilty of wrongdoing, then the campaign immediately donates their contribution to charity,” Canter said.

Democratic Party officials dismissed the significance of Goldman campaign contributions to Obama.

‘Tooth and Nail’

“This would be a lot more interesting if Wall Street banks, joined by Mark Kirk, weren’t fighting tooth and nail against the needed reforms the administration is advocating,” Hari Sevugan, Democratic National Committee spokesman, said in a statement.

Sevugan didn’t respond to an e-mail query when asked whether Obama plans to return money from Goldman Sachs employees. Jen Psaki, a White House spokeswoman, deferred questions about contributions to the DNC.

Giannoulias, 34, the Illinois treasurer, criticized Kirk April 19 for taking what he said totaled $21,600 from Goldman Sachs employees for the Senate campaign.

Kirk, a five-term congressman from Chicago’s northern suburbs, said he wanted to “err on the side of caution” as the SEC case unfolded.

A Goldman Sachs spokesman, Lucas van Praag, declined to comment yesterday on the question of contributions to Obama and other politicians.

Still Counting

Kirk, 50, said that his campaign is still determining how much Goldman Sachs employees donated to him, and that he hasn’t accepted money from the bank’s political action committee.

Goldman Sachs and its employees and family members gave $5.9 million to candidates in the 2007-2008 election cycle, data from the Washington-based Center for Responsive Politics shows. Three-quarters of that went to Democrats, the non-partisan group said.

Giannoulias’s campaign further criticized Kirk yesterday for agreeing to return contributions to his Senate campaign and not the full $54,010 it says Kirk has taken from Goldman employees during his congressional career.

“His artfully worded pledge to return contributions made only in the current cycle offers a fig leaf of ethical propriety, but in reality is nothing more than a typical Washington politician’s trick,” Giannoulias spokesman Matt McGrath said in a statement.

Fraud Allegations

The SEC filed a civil suit alleging Goldman failed to tell investors in a 2007 collateralized debt obligation that hedge fund Paulson & Co., which planned to bet against the CDO, helped select the underlying assets.

The bank has denied the SEC’s accusations and Greg Palm, co-general counsel, told analysts on a conference call yesterday that the firm didn’t intentionally mislead anyone.

For Obama, Wall Street provided three of his seven biggest sources of contributors for the 2008 presidential campaign. In 2007 and 2008, Goldman Sachs employees and family members gave him $994,795, Citigroup Inc. $701,290, and JPMorgan Chase & Co. $695,132.

Kathleen Strand, a Giannoulias spokeswoman, declined to provide a yes or no response when asked whether Obama should give money back to Goldman employees.

“Unlike President Obama, Republican Congressman Mark Kirk takes Wall Street money hand over fist and then votes their way every single time, including voting against Wall Street reform,” she said in a statement.

Kirk’s Money Lead

Kirk raised $2.2 million during the first quarter of 2010 and ended the period with more than $3 million in the bank, his campaign said April 7.

Giannoulias raised $1.2 million during the first quarter and ended the period with that amount in the bank, his campaign said last week.

The Senate seat in Illinois is held by Democrat Roland Burris, who isn’t seeking a full term. Republicans are trying to take advantage of ethical problems experienced by Illinois Democrats, including a public corruption trial set to begin June 3 for former Governor Rod Blagojevich, who appointed Burris to complete Obama’s term.