What to Expect

Wall Street Links

Bain Capital was just the beginning. Expect the Obama campaign to drive hard at pointing out Romney’s extensive campaign contributions from, and personal associations with, the financial sector. Also, expect such criticisms to largely fall flat.

The Obama campaign’s emphasis on Romney’s history at Bain did not prevent Romney’s poll numbers from rising in late May while the subject was widely discussed. Possibly, the line of attack even worked to Romney’s benefit by highlighting his business experience and spurring counterclaims that President Obama is anti-business.

Public displeasure with the financial sector has run high since the 2008 crisis and accompanying bailouts. Such sentiment fed into the Tea Party movement and was central to the Occupy Wall Street movement. Neither of those movements, however, retains the popular enthusiasm of its early phase. Whereas the Tea Party registered a strong impact on the 2010 elections before losing momentum, Occupy has declined without a clear record of tangible political effects.

Romney has far outpaced Obama in raising campaign funds from donors in financial-services industries. Figures through end-April compiled by the Center for Responsive Politics showed Romney had received $8.1 million in campaign donations from the securities and investment industry, compared to $2.7 million for Obama. A broader measure of contributions from the finance, insurance and real estate sector put Romney at $19.1 million compared to Obama’s $8.4 million.

Such disparities will provide material for the Obama campaign in depicting Romney as close to Wall Street. Yet such portrayals seem to be already accepted by the public and their significance discounted. In a May ABC News/Washington Post poll, a 56-32% majority said Romney would do more than Obama “to advance the economic interests of financial institutions.” The same poll showed Romney edging Obama 47-46% in being trusted to do a better job “handling the economy.”

Regulatory Simmering

Formally, Obama and Romney have vastly different positions on financial regulation. For the president, Dodd-Frank was a signature legislative achievement. For the challenger, Dodd-Frank was a bad package and should be repealed. However, arguments between the two campaigns over the regulatory overhaul are likely to be fairly muted.

There are diverse reasons for this. One is that the subject involves many technicalities that would fail to generate public excitement. A discussion of a uniform fiduciary standard, for example, is unlikely to occur during the presidential debates.

Moreover, delving into Dodd-Frank could require awkward side-stepping for both candidates. Obama would have to parry criticisms that the legislation failed to safeguard against future bailouts of too-big-to-fail institutions. Romney would have to provide some specifics as to what he would put in Dodd-Frank’s place (or else face complaints that he merely wants to return to the pre-crisis status quo).

Possibly, despite such considerations, financial regulation will indeed be a high-profile topic in the presidential race. In that case, the campaigns may seek to gain the upper hand by presenting major new policy proposals. For instance, Obama might call for a broad restoration of Glass-Steagall restrictions; Romney might opt for a “downsize the banks” strategy of limits or fees on asset size, as has been urged by some conservative analysts such as James Pethokoukis of the American Enterprise Institute.

However, both campaigns seem to be betting that financial rulemaking is not a particularly valuable issue for them (besides any concern that presenting detailed plans would limit future presidential freedom of action in the event of electoral victory). As campaign season heats up, don’t expect to hear very much about financial regs.