News Column

Wall Street Needs to Make Peace With the Winner

November 8, 2012

Susanne Craig, Nicholas Confessore

Wall Street

Few industries have made such a one-sided bet as Wall Street in opposing President Barack Obama and supporting his Republican rival. Now it has to come to terms with an administration it has vilified.

Del Frisco's, an expensive steakhouse with floor-to-ceiling windows overlooking the Boston harbor, was a festive scene Tuesday evening. The hedge fund billionaires Steven A. Cohen, Paul E. Singer and Daniel S. Loeb were among the titans of finance there dining among the gray velvet banquettes before heading several blocks away to what they hoped would be a victory party for their presidential candidate, Mitt Romney.

The next morning was a cold, sobering one for these executives.

The top five sources of contributions to Mr. Romney, a former top private equity executive, were big banks like Goldman Sachs and JPMorgan Chase, according to the Center for Responsive Politics. Wealthy financiers -- led by hedge fund investors -- were the biggest group of givers to the main "super PAC" backing Mr. Romney, providing almost $33 million, and they gave generously to outside groups in races around the country.

On Wednesday, Mr. Loeb, who had supported Mr. Obama in 2008, was sanguine. "You win some, you lose some," he said in an interview. "We can all disagree. I have friends and we have spirited discussions. Sure, I am not getting invited to the White House anytime soon, but as citizens of the country we are all friendly."

Wall Street, however, now has to come to terms with an administration it has vilified. What Washington does next will be critically important for the industry, as regulatory agencies work to put their final stamp on financial regulations and as tax increases and spending cuts are set to take effect in the new year unless a deal to avert them is reached. Not to have a friend in the White House at this time is one thing, but to have an enemy is quite another.

"Wall Street is now going to have to figure out how to make this relationship work," said Glenn P. Schorr, an analyst who follows the big banks for the investment bank Nomura. "It's not impossible, but it's not the starting point they had hoped for."

Traditionally, the financial industry has tended to support Republican candidates, but, being pragmatic about power, has also donated to Democrats. That script got a rewrite in 2008, when many on Wall Street supported Mr. Obama as an intelligent leader for a country reeling from the financial crisis. Goldman employees were the leading source of campaign donations for Mr. Obama, who reaped far more contributions -- about $16 million -- from Wall Street than did his opponent, John McCain.

The love affair between Wall Street and Mr. Obama soured soon after he took office and championed an overhaul in financial regulations that became the Dodd-Frank Act.

Some financial executives complained that in meetings with the president, they found him disengaged, while others on Wall Street never forgave Mr. Obama for calling them "fat cats."

The disillusionment with the president led to reams of critical commentary from Wall Street executives.

"So long as our leaders tell us that we must trust them to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire," Mr. Loeb wrote in one letter to his investors.

The rhetoric at times became extreme, like the time Stephen A. Schwarzman, co-founder of the private equity firm Blackstone Group, compared a tax proposal to "when Hitler invaded Poland in 1939." (Mr. Schwarzman later apologized for the remark.)

Mr. Loeb was not alone in switching allegiances in the recent presidential race. Hedge fund executives like Leon G. Cooperman who had supported Mr. Obama in 2008 were big backers of Mr. Romney in 2012. And Wall Street chieftains like Jamie Dimon of JPMorgan Chase and Lloyd C. Blankfein of Goldman Sachs, who have publicly been Democrats in the past, kept a low profile during this election. But their firms' employees gave a lot of money to Mr. Romney.

Starting over with the Obama White House will not be easy. One senior Wall Street lawyer who spoke on condition of anonymity said Wall Street had "made a bad mistake" in pushing so hard for Mr. Romney. "They are going to pay a price," he said. "It will soften over time, but there will be a price."

Mr. Obama is not without supporters on Wall Street. Prominent executives like Hamilton E. James of Blackstone and Robert Wolf, a former top banker at UBS, were in Chicago on Tuesday night, celebrating with the president.

"What we learned is, the people on Wall Street have one vote, just like everyone else," Mr. Wolf said. Still, while the support Wall Street gave Mr. Romney is undeniable, Mr. Wolf said, "Mr. Obama wants a healthy private sector, and that includes Wall Street.

"If you look at fiscal reform, infrastructure, immigration and education, they are all bipartisan issues and are more aligned than some people make it seem."

Reshma Saujani, a former hedge fund lawyer who was among Mr. Obama's top bundlers this year and is planning to run for office next year in New York, agreed.

"Most people in the financial services sector are social liberals who support gay marriage and believe in a woman's right to choose, so I think many of them will swing back to Democrats in the future," she said.



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