With Republicans angry about the financial regulations pushed through by President Barack Obama and congressional Democrats, the securities and investment industry was the only major source of campaign contributions to switch sides in 2012 compared with 2008, giving a record amount of money to Republicans and allied outside groups, led by presidential nominee Mitt Romney.
“What they did was totally uncalled for and totally unbalanced,” said Senate Majority Whip Richard Durbin of Illinois, the No. 2 Democrat.
In the final three weeks of the campaign, for example, Morgan Stanley and Bank of America Corp. employees were the top donors to Romney, a co-founder of the Boston-based private equity firm Bain Capital LLC. After giving Obama $16 million in 2008, Wall Street employees this time gave Romney more than $20 million.
They also backed Republican congressional candidates who challenged such crucial financial institutions as the Federal Reserve and International Monetary Fund, said Rep. Barney Frank, a Massachusetts Democrat and former Financial Services Committee chairman.
“It’s really an example of Wall Street letting emotions get in the way of its judgment,” Frank said. “They put the narrowest definition of their own self-interest over things they knew were important.” The result? Reducing tax breaks cherished by the financial community such as capital gains and carried interest may become attractive to those looking to raise revenue from high-earners.
“I don’t think there’s any doubt that carried interest is the low-hanging fruit,” said Daniel Crowley, a partner at K&L Gates LLP, which represents JPMorgan Chase & Co.
Wall Street is too important to the economy to be left on the sidelines, though.
“The White House is going to need some level of buy in from Wall Street and the business community to get legislation through Congress,” said Dan Bryant, chairman of the public policy group at Covington and Burling LLP.
For example, Goldman Sachs Group Inc. chief executive officer Lloyd Blankfein and president Gary D. Cohn joined other corporate leaders at the White House for meetings to discuss the combination of tax increases and spending cuts due to take effect beginning in January.
The invitations went out even as Goldman employees, Obama’s top industry source of campaign cash in 2008, became Romney’s biggest in 2012, giving more than $1 million.
Also working in Wall Street’s favor are “relationships that have been built up over a long period of time,” said Holly Fechner, a partner at Covington and Burling and a former Senate Democratic aide. “I do think a lot of those relationships are still intact.”
Lawmakers are differentiating between campaigning and governing. “If we stick to the issues, both sides will do well,” said Sen. Jack Reed, a Rhode Island Democrat who is chairman of the securities, insurance and investment subcommittee.
Former Rep. Ken Bentsen, a Texas Democrat who is now executive vice president of the Securities Industry and Financial Markets Association, said he and his colleagues still visit the Capitol every week to meet with congressional staff members of both parties.
“You want to hear all sides of the argument,” Bentsen said. “That’s the view I’ve seen folks take before the election, and I assume they will take it after the election.”