In October, Wall Street hosted a rich fundraiser at the Hilton New York for Mitt Romney. Hedge fund, private equity and investment banking big shots were among the nearly 200 co-chairs of the event that cost $1,000 to attend. Those who shelled out $5,000 got to leave with a photo with vice-presidential hopeful Paul Ryan, who was the big draw of the event.
Wall Street made a huge bet on Mitt Romney and lost. The financial services sector contributed $61 million to Mitt Romney’s campaign compared to giving only $18.7 million to Barack Obama, according to the Center for Responsive Politics. The $80 million spent on the two 2012 presidential campaigns by the finance sector was more than any other single industry. The finance sector includes insurance and real estate, but make no mistake, Wall Street’s most important firms led the way. Employees of securities and investment firms gave $20 million to the Romney campaign and employees of just Goldman Sachs, once a Democratic money stronghold, gave Romney’s campaign about $900,000, compared to the $136,000 Goldman employees sent to the Obama campaign. Bank of America’s employees also were big givers to Romney’s campaign.
And that was just the cash that went directly to the campaigns. Wall Street was by far the biggest single sector donor to super PACs, with the securities and investments industry investing $94 million, much of it to groups that supported Romney. Much of this cash came from investment managers like Ken Griffin, Paul Singer, Robert Mercer, John Paulson, and Joe Ricketts.
Wall Street’s overwhelming support for Romney represented a big shift from 2008, when many in the financial sector enthusiastically backed Obama. In some ways they were supporting one of their own, given Romney’s private equity background as founder of Bain Capital. But they were largely motivated by their disdain for policies Obama directed against them and the derisive names he called them.
They say elections have consequences and Wall Street is probably going to experience at least some fallout from Obama’s victory. One of the reason’s that Wall Street backed Romney was that he promised to get rid of the Dodd-Frank financial reform law. Now, some elements of the law that Wall Street hates most and have yet to go into effect, like limiting the big banks from making speculative bets, will likely be implemented soon.
In addition, the carried interest tax trick, which has allowed private equity and hedge fund investors to pay lower capital gains taxes on rich performance fees as opposed to higher ordinary income tax rates, will be under direct threat. In fact, all dividend and capital gains tax rates may very well increase in a second Obama term, which Wall Street won’t like at all.
But perhaps the biggest loss for Wall Street from the 2012 election will be to its reputation. The finance sector also poured money into Scott Brown’s Massachusetts Senate race, but failed to defeat Elizabeth Warren, a Wall Street foe who helped create the Consumer Financial Protection Bureau. Wall Street is increasingly looking small. It was unable to win a battle against a man many on Wall Street came to see as an enemy. Who is afraid of Wall Street? The place has lost its deterrent threat.