Wall Street shifting political contributions to Republicans
By Dan Eggen and Tomoeh Murakami Tse
Washington Post Staff Writer
February 24, 2010
Commercial banks and high-flying investment firms have shifted their political contributions toward Republicans in recent months amid harsh rhetoric from Democrats about fat bank profits, generous bonuses and stingy lending policies on Wall Street.
The wealthy securities and investment industry, for example, went from giving 2 to 1 to Democrats at the start of 2009 to providing almost half of its donations to Republicans by the end of the year, according to new data compiled for The Washington Post by the Center for Responsive Politics.
Commercial banks and their employees also returned to their traditional tilt in favor of the GOP after a brief dalliance with Democrats, giving nearly twice as much to Republicans during the last three months of 2009, the data show. At the same time, total political donations by the major banks and investment houses alike dropped in the waning months of that year.
The nascent shift came even before the White House announced proposals for a new tax on banks and a curb on some of their riskiest trading activities.
The proposals, offered last month, particularly alarmed Wall Street and have triggered renewed industry efforts to work with Democrats as well as Republicans on regulatory reform legislation that the bankers can live with, according to industry and government officials. Wall Street executives would prefer to engage with Democratic leaders now rather than face prolonged uncertainty about the rules to govern the industry, the sources said.
The new campaign contributions data underscore the political quandary facing Democrats, who want Wall Street donations to help fend off a GOP resurgence in congressional elections this fall but hope to distance themselves from an industry vilified by the public as greedy and ungrateful. President Obama has sought to strike a balance, calling outsize Wall Street bonuses "shameful" and "obscene" while also assuring business executives that he does not "begrudge people success or wealth."
Republicans, meanwhile, are soliciting Wall Street for donations with the argument that Democratic proposals would hurt the bottom lines of major financial institutions. House Minority Leader John A. Boehner (R-Ohio) told reporters this month that he was urging Wall Street executives to "help our team" oppose the "bizarre policies" coming out of the Obama administration.
One senior Republican staff member on Capitol Hill, who discussed contributions on the condition of anonymity, said: "Democrats in Washington are clearly trying to move legislation that would be very damaging to that industry. It was almost like there was a free ride time. But now they're starting to see the real negative impact of Democratic proposals."
Obama had unusually strong backing from Wall Street for a Democratic presidential candidate. He raised more than $18 million from bank and brokerage employees, for example, compared with rival John McCain's $10 million. (Obama did not accept money from PACs.) Prominent among Obama's bundlers -- individuals who raised at least $50,000 -- were private equity executives and hedge fund titans, including billionaire Kenneth C. Griffin of Citadel Investment Group, who had previously backed Republicans.
But Obama soon encountered stiff opposition from the financial industry -- and some fellow Democrats -- over proposals to curb executive pay, tighten rules on financial derivatives and create an agency to protect consumers of mortgages, credit cards and other financial products. Financial executives have also bristled at the president's increasingly populist tone over the past year, including his quip in December that he did not run for office to help "fat-cat bankers on Wall Street."
The industry has responded with its own change in attitude, according to contribution data and interviews. For some prominent executives, the final straw came in January, when Obama proposed a fee on big banks to recoup losses from the government's $700 billion program to bail out financial firms. When the president followed up a few days later with another plan to restrict the growth of large banks, some on Wall Street said they regretted their earlier support. "I'm not voting for him again," one said.
Still, others said they would not switch alliances just yet. "I understand people are not happy about this. Wall Street did pour a lot of money into the campaign, some of which I solicited," said one Wall Street executive and Democratic bundler, who spoke on the condition of anonymity because of the sensitivity of the topic. "Having said that, we're kind of responsible for a lot of what went down."
One Democratic-leaning firm that has signaled particular displeasure with the administration's direction is J.P. Morgan Chase, which is headed by Obama supporter James Dimon and features several other prominent Democrats in its upper ranks. The bank and its employees, who doled out nearly $500,000 in federal contributions last year, went from giving 76 percent of the money to Democrats in the first quarter to giving 73 percent to Republicans in the fourth.
In a pointed break with recent practice, the company's political action committee also contributed $30,000 to GOP congressional campaign committees in 2009 while giving nothing to their Democratic equivalents. According to one source familiar with its donation strategy, the bank did not want to offer blanket support for the Democratic committees, which could then use the money to support anti-Wall Street hopefuls.
Yet the bank and its executives are still ready to support specific Democratic candidates considered friendly to the financial sector. Last Wednesday, Jes Staley, the head of J.P. Morgan's investment bank, held a 50-person fundraiser at his home for Sen. Kirsten Gillibrand (N.Y.), who is trying to fend off a primary challenge by Harold E. Ford Jr., a former congressman who holds a senior position at Bank of America's investment bank. Ford has his own support in the financial sector.
The move toward the GOP is most evident among commercial banks, a buttoned-down sector that has historically favored Republicans to a greater degree than their swashbuckling counterparts in the investment banks. Bank of America, Citigroup and Wells Fargo all favored the GOP in combined individual and PAC contributions last year, according to the quarterly data compiled by CRP.
But analysts note that Democrats still came out ahead in gathering money from Wall Street in 2009 and said it is too early to tell whether the move toward the Republicans will continue. Many Democrats also declined contributions last year from banks that received federal bailout money, possibly accounting for some of the shift.
"There could be some changes at the margins," said Scott E. Talbott, chief lobbyist with the Financial Services Roundtable, which represents the largest financial institutions. The anger toward Washington, he added, "doesn't always translate to changes in political giving. The environment changes quickly and constantly. No one issue drives political donations."
Steve Hildebrand, a Democratic strategist who served as Obama's deputy national campaign director, argues that the party needs to swear off Wall Street money altogether.
"I think Democrats ought to be leaders in renouncing all money from special-interest groups, whether it's banks or trial lawyers or unions," he said. "But let's not kid ourselves; they're all doing it. Democrats are still fighting for the same money as Republicans. They're just not crowing about it."
Democrats in Washington have seized on GOP fundraising efforts in an attempt to link the party to unpopular Wall Street financiers. "Republicans have sent a clear message to the American people that Wall Street matters more than middle-class families and small businesses that are hurting on Main Street," Rep. Chris Van Hollen (D-Md.) said in a recent statement.
One GOP strategist said the party expects to face attacks on the issue no matter what. "We'd rather have the whacks and the money than the whacks and no money," he said.
Tse reported from New York. Staff writer David Cho contributed to this report.