The financial industry has turned on the administration and its allies in Congress. Wall St. cash flow imperils Democrats

A shift in the flow of Wall Street money toward Republicans earlier this year has become a torrent in the final weeks of the campaign, according to lobbyists and business executives doling out the cash.

“Our target ratio for the 2010 cycle is 80-20 Republican,” said Karen Klugh, spokeswoman for the American Financial Services Association.


It’s a striking departure from the 2008 cycle, when the association’s members, representing a broad swath of the finance industry, split their donations roughly evenly between Democrats and Republicans, she said.

The financial industry’s turn on the administration and its allies in Congress sheds light on the tattered relationships left in the aftermath of the economic meltdown and the government’s response to it. The vilification of bankers, what one bank lobbyist called the “show trials” of congressional hearings and especially the outcome of financial regulatory reform has prompted an all-out effort to wrest Congress from Democratic control, several financial industry insiders told POLITICO.

“AFSA contributes to candidates that we believe will foster an economic environment that supports the sustainable growth of our members,” Klugh said. “But much like the American electorate at large, our ratio this cycle reflects our deep concerns with the work of the 111th Congress.”

Some Democratic lobbyists for the financial community said a shift in donations was inevitable, given the industry’s longtime Republican leanings. But the sheer volume of it could tip the scales in some races.

Take the case of Ohio Democratic Rep. Mary Jo Kilroy, a targeted freshman who sits on the House Financial Services Committee — an appointment that typically prompts a windfall of donations from Wall Street.

Kilroy is running against Steve Stivers, a former bank lobbyist who has raised nearly four times as much money from the financial industry as the incumbent, who sat on the conference committee that finalized the financial regulatory reform law.

According to the Center for Responsive Politics, Kilroy has received about $35,000 from banks, investors and others in the industry, compared with the roughly $133,000 that has been donated to Stivers.

Kilroy’s camp has a simple explanation for the disparity: Stivers is one of them.

“Career banking lobbyist Steve Stivers is being financed by big banks, investment firms, millionaires and billionaires that want to repeal Wall Street reform,” said Kilroy campaign spokesman Brad Bauman.

“That is the agenda he would bring to Washington. That is why they are so eager to cut him checks.”

Stivers’s campaign spokesman, John Damschroder, counters that Kilroy “gets her money from big labor union bosses, ambulance-chasing trial lawyers and liberal special interests. Time and time again she has alienated the business community in central Ohio with her job-killing, big-taxing, mandate-supporting votes. That’s why there is a disparity.”

But Stivers is campaigning on a pledge to support changes in the law, a position heartily embraced by the financial sector. “There’s an eagerness by some in the industry to roll back Dodd-Frank ... and go after parts of it before it takes root,” said a Democratic financial services lobbyist.

House Minority Leader John Boehner (R-Ohio) promised to do just that late last spring when he met privately with Wall Street executives and lobbyists and urged them to get behind Republican candidates. The pace of giving has accelerated as the GOP prospects improved.

A lobbyist for one of the top five Wall Street investment banks said that he couldn’t even think of the last corporate donation or fundraiser for a Democrat in 2010. “I know there must be some,” he said, half in jest.

He said that overall donations to candidates are down sharply in 2010, in part because the reform law has passed. But the drop has been most pronounced for Democrats. “We feel betrayed,” the lobbyist said. “The administration came to us [in early 2009] and said, ‘We want to work with you,’ but when [Democrats in Congress] took over the process, they did nothing.”

A lobbyist for another giant Wall Street bank said the company’s political action committee had ceased donating to the Democratic campaign committees for the House and Senate and that other Wall Street banks had done likewise. He spoke ruefully about how important investment banks and their top executives were to the Obama campaign and the Democratic Senatorial Campaign Committee in 2008, when the DSCC was headed by Sen. Chuck Schumer (D-N.Y).

Corporate donations were probably close to 50-50 throughout 2009 and ran about 60-40 in favor of Republicans earlier this year, but they have skewed significantly more toward Republicans in the past few months, he said.

House Speaker Nancy Pelosi (D-Calif.) this week acknowledged that the huge shift in campaign cash toward Republicans is actually the main reason that Democrats are in danger of losing their House majority.

“Absent this, we were really pretty confident about winning the election,” Pelosi told the Huffington Post. “We still are. But this makes it harder,” she said.

Pelosi went on to say that Democrats would gain ground in the next month by tying corporate cash to the Republicans receiving it.

“Whenever you get hit with an overwhelming weight, you have to jujitsu it. So we want to turn it against them. ... Big Oil, big banks, big health insurance: We’re going to tattoo you with that, so it’s like doggy-doo stuck on your shoe,” she said.

That tactic was on display this week in Washington state, where state Democrats attacked Senate GOP challenger Dino Rossi for his close association with hedge fund manager Paul Singer, who gave more than $1 million to Karl Rove’s American Crossroads effort to funnel large amounts in independent expenditures to Republican campaigns.

Rossi, who is trying to unseat Sen. Patty Murray, is one of very few Republicans who have come out in favor of repealing the new financial reform law — a position Democrats say runs counter to opinion polls that show the legislation is supported by about 60 percent of the public.

But Rossi doesn’t seem worried about any damage that might come from his close ties to and heavy support from Wall Street.

On Sept. 30, he was one of seven GOP Senate challengers feted at a fundraiser in New York put on by Singer, along with fellow billionaire Steven Cohen and former George W. Bush Ranger Sam Fox.

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