Throughout the 2012 election cycle Republican candidate Mitt Romney has made ham-handed efforts at playing a populist. His standard applause line on the stump is an appeal to nationalism, that he will “never apologize for America.” He criticizes President Obama for “taking advice from the Harvard faculty lounge,” even though Romney himself holds law and business degrees from Harvard and counts Harvard professors among his economic and foreign policy advisers.
But from a funding standpoint, Romney’s campaign looks more like a third world oligarchy than a populist insurgency. Jetting to fundraisers in Manhattan and London, Romney has raked in donation from the most elite of financial institutions. His support from Wall Street has allowed him to build a sizable cash advantage, which pays for the expansive field organizing and advertising that should enable him to outgun his opponents through the primaries.
With the exception of Texas Governor Rick Perry, no other candidate has comparable corporate support. Through the second quarter of 2011, before Perry entered the race, Romney raised $17.6 million, more than all his GOP opponents combined. In the third quarter, ending on September 30, Romney piled on an additional $13.9 million. In December he returned to New York for a series of exclusive fundraisers, including a $2,500-per-person breakfast at Cipriani with executives such as former Goldman Sachs CEO John Whitehead and well-known hedge fund manager John Paulson, and a dinner at the Park Avenue apartment of Stephen Schwarzman, chairman of Blackstone, the world’s largest private equity firm.
Whereas President Obama raised 45 percent of his campaign funds through the third quarter from donors who gave less than $200, only 9 percent of Romney’s money came from small donors. While right-wing insurgents like Michele Bachmann rely on small donations coming in over the Internet, Romney collects checks from a small group of rich businessmen. And they are indeed overwhelmingly men: 70 percent of them, compared to 56 percent of Obama’s donors. More than 8,000 donors have given Romney the maximum of $2,500, compared to less than 6,000 maximum donors for Obama. As of the end of the third quarter, the two candidates now competing with Romney for primacy in the Iowa caucuses, Ron Paul and Newt Gingrich, had raised $12.6 million and $2.9 million for the entire cycle, respectively. Both were far more dependent on small donors than Romney.
Perry’s ability to summon vast sums immediately after jumping into the race left him with comparable cash on hand to Romney at the end of the third quarter (around $15 million each). But the key to Perry’s corporate fundraising success is more straightforward than Romney’s. His donor base draws heavily from energy (oil and gas) and waste management sectors, and his domestic policy agenda reflects those interests—opposing environmental regulations, for example. “If you put money in Perry’s purse, he’ll create policies you need,” says Tom Smith, director of Public Citizen’s Texas office.
In contrast, Romney’s big individual donors hail from major financial institutions. His top five companies are all banks or financial service firms: Goldman Sachs, Credit Suisse, Morgan Stanley, HIG Capital and Barclay’s. Bank of America and PricewaterhouseCoopers help round out his top ten. None of these firms—indeed, no financial companies at all—appear in Obama’s top ten. Only Goldman Sachs is among Obama’s twenty largest donors.
On biographical grounds it makes sense that Romney would appeal to the financial industry. The son of a former American Motors executive, he went into consulting and then co-founded Bain Capital, a private equity firm that bought troubled companies and attempted to turn them around and resell them. According to the Center for Responsive Politics, Romney has received $74,500 from Bain Capital employees and $52,500 from Bain & Company (the consulting firm).
Wall Street executives readily admit that some of his appeal to them is cultural. “[Romney] has business experience,” explains one former senior manager at Credit Suisee, “he looks like a Wall Street guy: handsome, tall.” Romney’s statements that might be widely perceived as gaffes—such as casually offering to bet Rick Perry $10,000 or declaring that “corporations are people”—appear to some Wall Street dealmakers as a sign that he’s one of them, a swaggeringly confident businessman.
Some financiers, like Schwarzman, are Republicans who may have chosen Romney because they think he’s the candidate most likely to beat Obama. Others may be simply trying to insure that the Republican nominee is a person with whom they can do business rather than an unpredictable ideologue like Gingrich or Bachmann. “In a time of populism, Romney represents the least populist candidate in the field,” says Soren Dayton, a Republican political consultant. “He’s very much an establishment candidate.”
“Among the other [Republicans] who are running, from the standpoint of many on Wall Street, they’re not very attractive,” says Peter Wallison, co-director of the American Enterprise Institute’s program on financial policy studies who served as Ronald Reagan’s White House Counsel. “Many don’t seem to be qualified. Romney seems qualified even if his views are sometimes difficult to be sure of.”
If you take Romney at his word, though, his economic policies would wreak havoc on financial markets. Romney opposed raising the debt ceiling, which would have set the bond markets into a tailspin. His economic plan would freeze or reverse the recovery by cutting domestic spending. By refusing to let federal spending rise above 20 percent of GDP, he would prevent the government from digging us out of future recessions. At the same time, he would offset savings from his spending cuts by increasing our bloated defense budget, and he would not be able to balance the budget because he wants to cut taxes. So the question is—just why is Wall Street backing Romney?
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In 2008 Wall Street fled the Republican Party and backed Obama over John McCain. According to the Center for Responsive Politics, the securities and investment industry gave Obama $15.8 million, compared to $9.2 million for McCain. “Obama knocked the ceiling off previous Wall Street fundraising in the modern era,” says Dayton. This time, through the third quarter of 2010, the same industry has given more than twice as much to Romney as to Obama. According to a Washington Post examination of the total financial sector, Romney has raised $7.5 million to Obama’s $3.9 million. Consider Goldman Sachs: in 2008 they gave more than $1 million to Obama, versus $240,295 for McCain. Through September, Goldman Sachs employees had given Obama just over $50,000 compared to $367,200 for Romney.
Obama has actually raised more from Wall Street than Romney when you factor in donations to the Democratic National Committee, which has no exact analogue on the GOP side since they don’t have a nominee yet. But when comparing apples to apples, it is Romney who has raised more than Obama from financial firms. “I don’t know why they have turned so strongly against Obama, but they clearly have,” says Bruce Bartlett, a veteran of the Reagan White House and George H.W. Bush’s Treasury Department. “There are lots of Wall Street types who in the past have been involved in Democratic politics, and when I hear them talk these days they sound like Tea Party people.”
Many bankers so dislike Obama they decided early on to find the most acceptable Republican alternative and coalesce around him. Some financial executives who didn’t cotton to Romney—including Charles Schwab and Paul E. Singer, a hedge fund manager and Republican fundraiser—were desperately pleading with New Jersey Governor Chris Christie to get in the race. After Christie took himself out of the running and endorsed Romney, some of those same magnates, such as Home Depot’s Ken Langone, have since joined Team Romney. Wall Street isn’t backing Romney so much as backing any sane Republican who has a chance of beating Obama.
This is all a bit strange when you consider that Obama has been far less anti-business in rhetoric and policy than the sensitive flowers on Wall Street might imagine. Indeed, the perception that Obama is anti-business would baffle many liberals who think he has been too accommodating of corporate interests. “He’s giving socialism a bad name,” jokes Robert Zimmerman, a New York area businessman who serves on the Democratic National Committee and has raised money for the last four Democratic presidential campaigns.
On policy terms, Wall Street has three major objections to Obama: impatience with the slow economic recovery, concerns about deficit spending and opposition to new regulations such as the Affordable Care Act and the Dodd-Frank financial reform law. It is, of course, unfair to blame the president for a slow recovery from a recession that started on his predecessor’s watch and has been exacerbated by Republican obstructionism. But in this regard, Wall Street types are behaving just like ordinary voters who tend to blame the incumbent for the state of the economy.
Some of Wall Street’s objections to Obama are legitimate, if wrongheaded, ideological differences. Stimulus spending was unpopular among many on Wall Street, for example, because bankers worry that selling too much government debt will suck up available capital that would be better invested in the private sector and that deficits ultimately lead to higher interest rates. It should be noted that while deficit worrywarts have been warning of impending higher interest rates and inflation for years, neither has yet come to pass.
On the other hand, there are policy complaints that reflect nothing but pure self-interest; Wall Street worries, for example, that Dodd-Frank will put a dent in their profits from derivatives trading. The more magnanimous-sounding version of this complaint is that Obama has prioritized passing regulations to achieve social goals over growing the economy. “The election will be a referendum on the president and his handling of economic policy. Many in the financial sector think it has been inappropriate,” says Douglas Holtz-Eakin, who served as John McCain’s main policy adviser in 2008. “If you look broadly at [Obama’s] record to date, you see a pattern where other interests—whether the green agenda, the union agenda on trade, the social agenda on health insurance—all of those trumped the economic growth agenda.”
What’s strange, though, is that passing initiatives like healthcare reform was not some secret socialist scheme Obama smuggled into the White House after his inauguration. He ran explicitly on promises to do exactly what he did and more. In fact, Obama put off many of his priorities, such as immigration reform and “don’t ask, don’t tell” repeal, to focus on stimulus legislation, the bailouts and Dodd-Frank. He even handed wealthy businessmen a sweet Christmas present last year in the form of a last-minute extension of the Bush tax cuts for the top income bracket, which he had pledged to repeal during his campaign, a promise he has now renewed. Wall Street has gotten exactly what they voted for in 2008. “There’s nothing surprising about what they’ve experienced with the president,” says Holtz-Eakin. “He was saying these things [during the 2008 campaign].”
But most people in the financial industry, like most people in any field, are not expert policy wonks. Their impressions are broad, and their view of a given issue is often inductive. That is to say, if you are a banker who thinks regulation is generally best avoided, you are likely to assume a complex new set of regulations such as healthcare reform or financial reform is cumbersome meddling. Likewise, one high-profile comment from the president about how he “did not run for office to be helping out a bunch of fat cat bankers on Wall Street” can create an impression of hostility that Obama can’t shake. The difference, though, between most Americans who don’t work in politics and the ones who work on Wall Street is that bankers make enough money to heavily influence the political process through donations.
Just because most people on Wall Street are not policy experts doesn’t mean they lack political savvy. The businessmen donating to Romney know better than to believe him when he says something stupid about the economy. Romney’s long history of acrobatic flip-flopping and the palpable dishonesty of his pandering to the Tea Party actually help him in this context, because his wealthy supporters don’t think he actually means the nonsense he spouts. “Looking at Romney’s supporters in the business community, there’s not one who is worried about his stance on the issues, because it will change in a day or two anyway,” explains Zimmerman. “The point is not to find out his positions today, it’s to have influence when he makes the decisions. They want to make sure they get his ear last.”
“[The financial industry] will support whoever they think will win to get favors from the administration,” says Phil Kerpen, vice-president for policy at the Tea Party–aligned Americans for Prosperity. “That’s why they switched from Republicans to Obama and are now switching back. They just want continuity and a treasury secretary who will be one of theirs.”
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Perhaps the most important thing Republicans and Romney offer Wall Street is moral absolution. To stomach Obama’s rhetoric and to accept the need for Dodd-Frank and the bailouts is to admit that Wall Street’s problems have been largely of its own making. If you are a liberal, you probably travel in circles where it’s taken as a given that irresponsible behavior on Wall Street is what caused the financial crisis and ensuing Great Recession. But many bankers do not like to think that, and so they nod in agreement when Romney and other Republicans say that the real cause of the meltdown was mushy-headed liberal government interventions that forced banks to give mortgages to unqualified poor people. When Republicans say the solution to what ails the US economy is to unleash the heroic job-creators, it flatters the implicit heroes: the corporate executives and the banks and investment firms that lend them money and help them raise capital.
The perception that Obama has adopted a nasty tone towards business is widespread in the community, and comes up in interviews with bankers, traders and business executives from across the political spectrum. “[Obama’s] really been meanspirited to Wall Street,” says the Credit Suisse alum. “People on Wall Street feel they have been scapegoated.”
Republicans and conservatives offer bankers an appealing opportunity to rewrite history. Wall Street was alienated, says Wallison of AEI by “all the rhetoric that Obama has used in order to get [Dodd-Frank]: calling them ‘Wall Street fat cats’ and agreeing with many people who said people on Wall Street were greedy and the financial crisis was their fault.” Wallison’s version of events—in which “government created the demand for [subprime] mortgages” and the bailouts were an unnecessary government intervention that made banks unfairly look bad—is a much more appealing story to a banker’s bruised ego.
On November 28, the same day that Schwarzman announced his support for Romney, a Wall Street veteran named Leon Cooperman penned an open letter to Obama, published on the website The Street, that epitomizes the views of Obama’s wealthy former supporters. Cooperman spent twenty-five years at Goldman Sachs and now runs his own private investment firm, Omega Advisors. The letter’s tone alternates between sorrow, anger and imploring. “I hoped that your election would bring a salutary change of direction to the country, despite what more than a few feared was an overly aggressive social agenda,” Cooperman writes. “Whether this reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them.”
At the time Cooperman wrote this it may have seemed overwrought. But perhaps it was prescient. Obama’s rhetoric has only become more populist in recent weeks. Prodded by Occupy Wall Street—who he has spoken sympathetically of, much to the industry’s chagrin—Obama has defined his re-election campaign around the issue of inequality.
In early December, Obama traveled to Osawatomie, Kansas, where Teddy Roosevelt gave his famous “New Nationalism” speech, to highlight the subject. Obama decried, “Huge bets—and huge bonuses—made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.” Roosevelt, said Obama, “knew that the free market has never been a free license to take whatever you can from whomever you can. He understood the free market only works when there are rules of the road that ensure competition is fair and open and honest. And so he busted up monopolies, forcing those companies to compete for consumers with better services and better prices.”
Obama went on to list the statistics on growing inequality that we all know, and the tepid proposals he’s been hawking to address them: let Bush’s income tax cuts for the wealthy expire, invest in education and renewable energy. But he also pointed his finger at Wall Street’s misbehavior, promised to get tough on them and laid the responsibility for repairing trust between them and the American people squarely at their feet:
“Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes those penalties count…. this crisis has left a huge deficit of trust between Main Street and Wall Street. And major banks that were rescued by the taxpayers have an obligation to go the extra mile in helping to close that deficit of trust. At minimum, they should be remedying past mortgage abuses that led to the financial crisis. They should be working to keep responsible homeowners in their home.”
Obama also castigated the Republicans for refusing to confirm Richard Cordray, the former attorney general of Ohio, to run the Consumer Financial Protection Bureau. Cordray was nominated only because Republicans wouldn’t confirm Obama’s first choice, Elizabeth Warren. Wall Street despises Warren, and now that she is running for Senate in Massachusetts, they are investing heavily in her Republican opponent, Senator Scott Brown.
Businessmen might comfort themselves by thinking that because Romney is one of them, he must be a rational empiricist who won’t let kooky conservative ideology get in the way of sound governance. Alas, Romney’s reputation for being a pragmatist and technocrat, even historically, is largely undeserved. As governor of Massachusetts he presided over the forty-seventh-best rate of job growth in the nation, better than only Ohio, Michigan and Hurricane Katrina–devastated Louisiana. And he frequently put conservative ideology—or political ambition—ahead of his state’s economic interests. He restricted embryonic stem cell research and opposed renewable energy investment, despite the fact that scientific research is an important and growing sector of the Massachusetts economy. Betting that Romney doesn’t mean the silly things he says now is an awfully risky proposition. Luckily for Romney, Wall Street likes risky bets.