Wall Street Backing Republicans in Elections

Monday, 11 Oct 2010 09:14 AM

 

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After lavishing millions on Democrats in the last two elections, major US financial firms have largely abandoned their once-darlings in favor of Republican candidates in the upcoming mid-term vote.

Whether to punish the Democrats for unpopular financial policies or simply out of a desire to back the winners, Wall Street is largely leaning this year towards the Republicans, judging by campaign contributions.

"Wall Street is trying to curry favor with who they think is coming back to town," said Sean West, US policy analyst at Eurasia Group.

"It is as much a bet on who you think is going to win as it is a representation of whether they are pleased with the policy proposals."

Financial firms have given Democrats a cold shoulder since President Barack Obama signed the financial reform legislation in July, says Dave Levinthal of the Center for Responsive Politics, which monitors election funding sources.

"Wall Street-related contributions took a dramatic shift towards the Republicans since the beginning of this year and it is no irony that financial regulatory reform was heating up at the same time," Levinthal said.

According to the center's study, Republican candidates received 34 million dollars in donations from the finance, insurance and real estate sector since January compared to 23 million dollars given to Democrats.

The Democrats' sweeping reform of the finance industry, which introduced new consumer protections, checks the power of big banks and fights deceptive practices by credit card firms, raised the ire of many on Wall Street.

The Republicans were swift to pledge to repeal the legislation.

A stark example of the shift in support among large finance firms is Goldman Sachs, traditionally considered a stalwart backer of Democrats which in 2008 gave 75 percent of its campaign donations to Democratic candidates.

This year, 56 percent of a total of 1.7 million dollars in donations went to Republicans, figures provided by the Center for Responsive Politics show.

Republican candidates also pocketed 58 percent of a nearly one million dollars in donations from Bank of America and 61 percent of 680,000 dollars from Wells Fargo.

American Express was also among the strongest backers of Republicans, donating 61 percent of almost half a million dollars.

One exception is Morgan Stanley, which remained largely on the Democratic side, giving its candidates 55 percent of 1.1 million dollars in donations.

Nevertheless, the list of the top 20 recipients of donations from financial firms is led by two Democratic candidates from New York, Charles Schumer and Kirsten Gillibrand, who are still seen as strong advocates of Wall Street.

While companies are not allowed to make direct donations to candidates, its executives and employees can contribute directly or through a committee set up by the company.

Companies are hoping to cash in their support of Republican candidates by getting direct access to the apparent future key decision makers.

"You want to donate to the people who are going to be in power so that they answer your phone calls," said West.

"If you think the Republicans are going to win, you definitely want to be friends with Spencer Bachus who could be the chair of the House Financial Services Committee or with John Boehner who could be speaker and prevent any bill that would punish Wall Street from getting to the floor."

But hobnobbing put aside, the Republican agenda in the upcoming elections is considered more favorable to Wall Street interests.

"The Republicans are running on platform of much more fiscal responsibility, that means reducing the amount of debt that the country has to issue to fund the various programs in the budget," said Nicholas Colas, ConvergEx Group chief market strategist.

"The market perceives that as a positive because obviously sovereign debt is a big concern."

Recent polls have indicated that the Democrats are set to lose their majorities in the Congress and Senate in what is widely perceived as a vote of no-confidence in Obama's efforts to resuscitate the ailing economy.

But the margin in both houses might be too small for either camp to be able to impose its policies, creating a stalemate that Wall Street likes, analysts said.

"Gridlock in Washington is considered as a positive on Wall Street, it means that there is no change, and anything that reduces the volatility will be considered a positive," said Colas.

© AFP 2014

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