It is often assumed that Wall Street is a staunchly Republican place, with the investment community preferring to support a political party that has long been associated with low corporate taxes and limited business regulation. But an analysis of this election season’s political handouts reveals that Wall Street takes a far more practical approach to political giving.
The two political parties’ presidential candidates have raised a record $700 million in funds this election season, and the portion of those funds donated by Wall Street firms is spread fairly evenly between the Republicans and the Democrats.
“Historically, the Republican Party has been the party of big business and it has received a disproportionate share of Wall Street’s money,” said Nathaniel Persily, a professor of law and politics at the University of Pennsylvania in Philadelphia.
“But sometimes there’s a good business reason to contribute to the Democrats, or to both parties, and so I think what we are seeing is Wall Street wants more than anything else to curry favor of those in power and those that are likely to win the election,” he added.
Among the reasons for Wall Street’s pragmatism is an acknowledgement that the Democratic Party of today is not the same as that of yesteryear, often associated with high taxes for the rich and over-regulation of business, says Persily. Another motivating factor in political giving is simply the desire to see government policy change.
“There are businesses that believe the foreign policy pursued by the Bush Administration has made it harder for them to do business overseas, and some think the ballooning deficit has been a disaster and they are taking a new look at the Democratic Party,” he said. “That said, the fact that Republicans hold the balance of power in Congress will give them the edge when it comes to getting money from Wall Street.”
Hedging bets
With the 2004 election campaign entering its decisive phase and polls showing the U.S. electorate almost evenly split, political donations from Wall Street types are similarly divided.
The securities and investment industry has given some $64 million to federal candidates and parties so far this election season according to Lawrence Noble, executive director of the Center for Responsive Politics, a group that monitors campaign finance.
Fifty-two percent of those funds have gone to Republicans and 48 percent to the Democrats Noble said. Most of the money is coming from individual donations, as opposed to political action committees, or PACs — private groups organized to elect or defeat government officials in order to promote legislation or special interests.
“The Democrats are getting slightly less, but with the Republicans in control of Congress that’s pretty even-handed,” Noble said. “Sometimes companies are very pragmatic and split their contributions. They lean toward one political party, but they also hedge their bets by giving to the other party.”
The Investment Company Institute (ICI) — a national association for the mutual fund industry — is a case in point. The group splits its $530,306 donation, which consists almost entirely of money from its own PAC, between Republicans and Democrats. Contributions to the PAC come from employees of member firms of the ICI, which includes many of the nation’s top mutual fund companies. The firms themselves are not allowed to contribute.
“Our political donations reflect our bipartisan legislative agenda,” said Chris Wloszczyna, a spokesperson for the ICI. The primary focus of the ICI’s agenda is the promotion of the use of retirement savings and the use of mutual funds, he added.
Others appear more willing to show their political stripes.
Brokerage giant Merrill Lynch, for example, Wall Street’s fourth biggest political donor, has given 72 percent of its $1.79 million donation to Republicans and the rest to the Democrats according to the Center for Responsive Politics. By contrast, Lehman Brothers, the fifth largest contributor, gives 63 percent of its $1.59 million to the Democrats.
Corporate money follows power
Of the $619,700 donated by Pittsburgh-based investment management firm Federated Investors, 95 percent went to the Republicans and the rest to the Democrats. Most of the money came from individual employees, with the remainder coming from a company PAC to which company executives contribute. “Company employees are entitled to make contributions to the political candidates of their own choice,” said company spokesman J.T. Tuskan.
As of Aug. 31, PACs have reported donating about 20 times more in funds to President George W. Bush than to his Democratic challenger, Sen. John Kerry, according to records gathered by PoliticalMoneyLine.com, a campaign finance information Web site.
According to the data collected, President Bush has received $360,299 in PAC money from the finance and insurance industries, compared with $5,000 donated to Kerry, although the Kerry campaign has said it will not accept donations from PACs.
“The Republicans control the executive branch and the Congress and PAC money tends to go to the party in power, and PACs contribute to those that control the committees that have oversight over economic issues,” said Tony Raymond, co-founder PoliticalMoneyLine.com. “Their motivation is driven by their bottom lines and they are getting their donations to those that have the biggest influence on their bottom lines.”
A PoliticalMoneyLine.com study of donations from CEOs of companies in the large-cap Russell 1,000 index shows an overwhelming number have given funds to the Republican Party, Raymond added.
Indeed, South Dakota Democrat Tom Daschle is the number one recipient of PAC donations from companies in the financial industry according to data from the Center for Responsive Politics. Daschle is not only Senate minority leader, he is also on the Senate Finance Committee, a group that is key in determining tax legislation, which is important to financial services firms and corporations according to Lawrence Noble.
Corporate money has always moved in lockstep with the political power in Washington, Noble notes. Back in 1992, when Bill Clinton became president, Wall Street gave 53 percent of its money to the Democrats, but the balance shifted toward the Republicans when the GOP gained control of the House and Senate in 1994.
“After they won control of Congress, the money switched over to the Republicans — it’s a classic industry trend,” he said.