In 2008, Wall Streeters invested millions in Barack Obama’s campaign. Many of these big donors were thus a little miffed when Obama, as President, derided Wall Streeters as “fat cats” and, to add injury to insult, threw his support behind the Dodd-Frank bill, much hated in the financial sector it was designed to reform.
This time around, Wall Streeters turned against Obama, sending an even bigger torrent of cash Mitt Romney‘s way. That didn’t quite work out as planned. “It’s a zero-percent return,” one Republican donor complained to New York magazine on the cold Wednesday after Obama’s victory.
Having turned on Obama, can Wall Streeters now expect the President to turn on them? Will he seek some sort of retribution against those who helped to fill Romney’s overflowing coffers?
Signs point to “no.”
True, with Romney out of the way, Wall Streeters will have to give up their hopes of Dodd-Frank being scuttled, as Romney had pledged to do. And they may have to pay higher taxes on their still-gigantic pay packages.
But despite Wall Street’s indignant and sometimes unhinged rhetoric — the chair of one prominent private equity firm once compared the administration’s tax plans to Hitler’s invasion of Poland — Obama is hardly the Wall Street hater many of his wealthy critics made him out to be.
“[B]esides hurt feelings and vague threats, the actual political and financial damage done to the Wall Street elite during Obama’s first term was approximately nil,” Kevin Roose points out in New York magazine. “On the contrary, banker bonuses remained high, the Dow Jones Industrial Average nearly doubled, and corporations saw their profits grow an astounding 77.9 percent a year. Obama continued the Bush-era bailout plans for big banks, and rich people were still the beneficiaries of a friendly tax code … .”
Despite his remarks about “fat cats,” Obama has given little indication that he’ll adopt a more aggressive stance with Wall Street the second time around.
One early sign of how things are likely to go will be Obama’s pick to replace Treasury Secretary Tim Geithner, who won’t be sticking around for Obama’s second term. Obama seems unlikely to want to rock the boat. The current favorite seems to be White House Chief of Staff Jack Lew, a former Wall Streeter who earned a reputation as a deft dealmaker as the head of Obama’s Office of Management and Budget.
Some on Wall Street, meanwhile, are hoping Obama throws them an even bigger bone by appointing Erskine Bowles, former Bill Clinton chief of staff, who helped craft the budget-cutting, deficit-busting Simpson-Bowles plan as a leader of a bipartisan Fiscal Responsibility and Reform commission last year.
Certainly many on Wall Street must be pleased to see Obama indicate his willingness to cut a deal on the deficit, announcing on Friday his intention to meet with leaders of both parties in the coming week to get the discussion started. While Wall Streeters may not be thrilled with the President’s focus on tax increases for people like them, a deal would mean an end to uncertainty, and Wall Street always likes that.
Will Wall Street do its part to mend its frayed relationship with the White House? So far, many on Wall Street have responded to Obama’s victory with frat-boy petulance. “Thank you, Obama,” one Citigroup trader shouted sarcastically as markets plunged on Wednesday.
But other, more responsible, voices on Wall Street are taking a more conciliatory stance. “We cannot continue the warfare between Wall Street and Washington,” SNL bank analyst Nancy Bush told Forbes. Meanwhile, lobbying groups for the financial industry are talking cooperation.
Wall Street may have less to worry about from Obama than from newly elected Massachusetts senator Elizabeth Warren – who, as the developer of the Consumer Financial Protection Bureau, has hardly been shy about criticizing the financial industry. Some think the outspoken former Harvard professor may end up getting a seat on the Senate Banking Committee, which would give her considerable clout over financial regulations, including attempts to water down Dodd-Frank.
I suppose it’s only a matter of time until some Wall Street bigwig publicly compares her to Hitler.