In the 2008 presidential race, Barack Obama had a substantial edge over John McCain in raising money from Wall Street. That advantage has not only evaporated for the president in the current race, but has reversed dramatically.
In the 2008 cycle, Obama raised nearly $16 million from the securities and investment industry, compared to a little over $9 million for McCain, according to data compiled by the nonpartisan Center for Responsive Politics. More broadly, Obama raised some $42 million from the finance, insurance and real estate sector, versus $31 million for McCain.
This time around, the figures tell a very different story. As of late August, Mitt Romney’s contributions from the securities and investment industry had totaled almost $11.5 million, compared to almost $4.2 million for President Obama, according to a Center for Responsive Politics compilation of Federal Election Commission data. The numbers for the broader finance, insurance and real estate sector showed a similar disparity: about $28.6 million for Romney, against $12.2 million for Obama.
Also showing Wall Street’s tilt to the Republican challenger was the Center for Responsive Politics’ list of top contributors by organization (including donations by employees and their families, as well as political action committees). Across all sectors, Obama’s five biggest sources were: the University of California, Microsoft, Google, law firm DLA Piper and Harvard University. Romney’s biggest sources: Goldman Sachs, JP Morgan Chase, Morgan Stanley, Bank of America and Credit Suisse.
(For a further breakdown of campaign contributors, read Obama vs. Romney: Top 7 Places Where Campaign Cash Comes From at AdvisorOne.)
The strong flows of Wall Street money to Romney in 2012 and to Obama in 2008 both marked departures from an overall pattern of evenhandedness within the industry toward the two parties. The Center for Responsive Politics’ figures on contributions by the securities and investment industry in presidential and congressional races since 1990 show 49% of funds going to Democrats and 51% to Republicans.
During Bill Clinton’s presidency, building bridges to Wall Street was a Democratic priority. Democrats worked with Republicans in scaling back financial regulations, and the two parties vied for support from a growing “investor class” of voters with exposure to stock portfolios. Clinton officials like former Goldman Sachs co-chair Robert Rubin emphasized deficit cutting and cited the bond market as a barometer of fiscal success.
Disenchantment with the Obama administration among financial professionals can be traced to various causes. The Dodd-Frank financial reforms rank high on the list, amid controversy over matters ranging from the Volcker Rule to the prospect of a uniform fiduciary standard for financial advisors. The health care overhaul’s tax increases, including a 3.8% tax on net investment income, also stirred Wall Street discontent. Romney has called for repealing both Dodd-Frank and the health care law.
Competing tax proposals are a sharp area of contrast between the president and the Republican challenger, fraught with potential consequences for financial pros with high incomes and wealthy clients. Obama has proposed tax hikes for the top 2% of income earners, including a 39.6% top rate on ordinary income. Romney has proposed cutting income tax rates by a fifth, putting the top rate at 28%.
Rhetorical broadsides, as well as policy positions, have generated tensions between the White House and Wall Street. The president famously decried “fat cat bankers” in a 60 Minutes interview and has asserted his opposition to tax breaks for “millionaires and billionaires” along with “hedge fund managers and corporate jet owners.”
In a widely viewed campaign ad titled “The Choice,” the president says: “Governor Romney’s plan would cut taxes for the folks at the very top, roll back regulations on big banks, and he says that if we do our economy will grow and everyone will benefit. But you know what? We tried that top-down approach. It’s what caused the mess in the first place.” According to Bloomberg News, the Obama campaign spent $22 million on that ad, some 17% of its TV commercial spending through late August.
The American Future Fund, a pro-Republican group, spent nearly $4 million in February on an ad titled “Obama’s Wall Street,” which noted his big 2008 intake of campaign funds, support for the bailout and administration appointments of people with financial backgrounds. “Now, Obama’s flush with cash, returning to Wall Street for more glitzy fundraisers,” the voiceover intoned. The ad did not mention that Romney already was outpacing Obama in Wall Street fundraising.
Beyond the Election
The outcome of the presidential race will help determine whether the current shift of Wall Street support toward Republicans is a short-lived or lasting phenomenon.
If Obama wins re-election, Democratic politicians and strategists may take the lesson that a confrontational stance toward Big Finance carries political benefits that are worth the price of diminished contributions from deep-pocketed industry donors. That lesson will be reinforced if Elizabeth Warren wins the Senate race in Massachusetts and gains a Capitol Hill platform for her criticisms of financial institutions.
At the same time, though, a Romney loss would spur a backlash within the GOP against the candidate’s real or perceived weaknesses. Quite likely, this would include an outpouring of complaints that the party chose a nominee who was too close to Wall Street in policies, background and style. During the primaries, hopefuls including Rick Santorum, Newt Gingrich and Ron Paul sought to appeal to populist strains of antipathy toward the financial sector.
A Romney loss could give new life to such populism as the GOP recoups for future elections, possibly repelling the party’s newfound Wall Street donors. It also would cause much grumbling among conservatives that the nominee was too moderate. This prospect is complicated somewhat by Romney’s choice of conservative favorite Paul Ryan as running mate. However, Ryan’s support of TARP during the financial crisis may also spark some anti-Wall Street backlash if the Romney-Ryan ticket loses.
If Obama loses his re-election bid, the calculus will be different. One response among Democrats would be anger at the financial sector for helping cause the loss by not helping the campaign. However, there would be some pragmatic efforts by top Democrats to rebuild ties to Wall Street so as to boost fundraising for coming election cycles.
The two most prominent Democratic politicians who may run in 2016—Secretary of State Hillary Clinton and Vice President Joe Biden—both tended in their Senate careers to maintain good relations with the financial sector, with its significant presence in their respective states of New York and Delaware. In her 2008 presidential campaign, Sen. Clinton received over $7 million in donations from the securities and investment industry, a figure exceeded only by the two eventual nominees.
If the 2016 election is one in which, say, a Pres. Romney runs for re-election against a Sen. Elizabeth Warren, the current Wall Street tilt toward the GOP may last for many years to come. Short of such a scenario, however, it is likely that the financial sector will return before long to its historical equilibrium, splitting its political support among the two parties and not being closely identified with just one.
For a further breakdown of campaign contributors, read Obama vs. Romney: Top 7 Places Where Campaign Cash Comes From at AdvisorOne.