The business community tends to play percentages and right now they favor the president. Wall Street braces for an Obama win

NEW YORK — Mitt Romney was Wall Street’s dream candidate, a former private equity executive committed to lower taxes and less regulation who would never rip bankers as “fat cats” as President Barack Obama famously did.

But now many masters of the universe concede they may not get their man.


Across Wall Street and the broader landscape of corporate America, even strong supporters of Romney acknowledge that swing state polling numbers and the direction of economic data and markets suggest it’s time to brace for a second Obama term.

“It looks right now like it’s probably going to be Obama, so you have to start planning for that, even if it’s not what you would prefer,” said the chief executive of one of the largest companies in the United States who has criticized the president and spoke on the condition of anonymity in order to give a frank assessment of the state of the race. The executive added that plans were under way to work with a second Obama administration on selling a plan to avoid the fiscal cliff with major tax and entitlement reform that includes some new revenues.

“We don’t really care if our taxes go up a little if we can just get this done and take this threat away from the economy,” the executive said, adding that support from CEOs could give cover to Republicans in Washington concerned about supporting any new taxes and angering tea party hardliners and anti-tax advocates such as Grover Norquist.

They still go to Romney fundraisers, open their wallets and hope for the best, especially in the upcoming debates. It’s just that Wall Street and the business community tend to follow data and play percentages. And right now they favor the president.

It makes for an uncomfortable moment for Wall Street, which came out much more aggressively for Romney than Obama this year, after Obama made significant inroads with the finance sector in 2008.

The shift in tone among executives toward Obama was on display at the Clinton Global Initiative this week, where several CEOs softened their criticism of the president. Goldman Sachs CEO Lloyd Blankfein acknowledged there had been widespread “disappointment” with Obama within his firm and across Wall Street.

But he also said that it was time to move on and finally deal with rising debt and unsustainable entitlement programs. “People who have been pouting and holding their breath aren’t going to want to do that for four more years,” he said.

John Chambers, CEO of Cisco Systems and a strong Romney supporter, spoke of bridging partisan divides on taxes and spending should Obama win a second term. And in an interview with Reuters, Chambers said whoever wins should govern like Bill Clinton. “There’s a lot to learn from President Clinton. It kills me as a strong Republican saying it, but he was the most effective president during my lifetime,” Chambers said.

The Obama administration has already begun laying ground work for improving its soured relationship with corporate America in a possible second term.

To be sure, there are still plenty of Romney partisans across Wall Street and the business community who are far from giving up and dismiss talk that the former Massachusetts governor is fading.

“I don’t think donors are reacting at all,” to the negative poll numbers said Woody Johnson, owner of the New York Jets. “We had Romney here three weeks ago and had the biggest three events we’ve ever had. We raised $8 million. We had a breakfast where we would normally do $1.5 or $2 million and we did $4 million.”

Johnson added that executives know a campaign ebbs and flows and that there is time for a late comeback win. “They know in business and politics things are very fluid. I’m extremely confident and the people I talk to are cautiously optimistic.”

Privately, executives are a little less sanguine. “There’s still opportunity for Romney to catalyze and shake up the race and break through this narrative,” said one senior executive at a large bank who has supported the Romney campaign and who declined to be identified by name to speak openly. “But he has got to somehow make this a referendum election and not a choice election. And if he doesn’t do that — and I’m not so sure he can at this point — then he is not going to get the golden ticket.”

In large part, the executives are reacting to a growing pile of data suggesting the election is moving away from Romney.

All three so-called prediction markets, in which people bet on the election outcome, give Obama between 70 and 80 percent odds. PredictWise, which averages the three major indices, has Obama at 77.1 percent.

It’s a remarkably large spread according to Justin Wolfers, a University of Pennsylvania Wharton School economics professor who has published research on the subject. “It’s not unusual for the incumbent to be ahead by a few points this far out. What is unusual is the view [reflected in the numbers] that there is unlikely to be any large movement between now and Election Day,” Wolfers said.

He added that the surveys suggest Obama is mostly viewed as a lock by investors with 20 or so percent betting on some major event between now and Nov. 6 destabilizing the race in Romney’s favor.

Romney backers on Wall Street and in corporate America also mostly discount the tight national numbers and obsess over recent polling out of Ohio, Virginia, Florida and other swing states showing a growing Obama advantage and a very challenging road to 270 electoral votes for the GOP nominee. And they point to data showing Obama has drawn even or moved ahead as the candidate most trusted to deal with the economy and jobs as voters grow increasingly confident about their future prospects.

On Tuesday, for instance, the widely followed Conference Board measure of consumer confidence surged to 70.3 from 61.3 last month. House prices are also on the rise again which boosts sentiment. In the most recent Wall Street Journal/NBC News poll, 42 percent said the economy would improve over the next year, the biggest number since 2009.

And the Dow is up nearly 50 percent since Obama took office, meaning workers’ 401(K) statements look better, further negating the so-called grumpy voter effect that was previously seen as likely to push undecided voters Romney’s way.

All these numbers have led to a recalculation in corporate boardrooms and D.C. lobby shops.

Inside the Beltway, financial services lobbyists are starting to hedge their bets. For many in the industry — private equity, hedge funds and investment banks — the ramifications could be huge if Democrats retain the Senate and Obama is leading the effort to a major tax overhaul.

Perennial issues like carried interest, a favorite hobby horse of Senate Democrats, could be on the chopping block. The industry most certainly would be on the defensive, according to several financial services lobbyists. And the optimism that agency heads would change and new rules in the pipeline like the Volcker Rule would vanish or get watered down is no longer the case.

Despite the most recent polls and economic forecasts, not all banking lobbyists are willing to concede the election. “The banking industry knows for them this is by far and away the most important election, bar none,” Consumer Bankers Association President Richard Hunt said, noting the headwinds against banks will be much stronger in a second Obama administration.

So the fight continues. But confidence among corporate executives that they could get one of their own in the White House is clearly ebbing.

“The silver lining is that there is probably going to be a better economy with Obama or without him,” said a forlorn senior Wall Street executive. “It’s just going to be a little slower with him. But people are kind of getting resolved to it.”

This article first appeared on POLITICO Pro at 6:13 a.m. on September 27, 2012.

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