Wall Street swings back to the GOP after supporting Obama over McCain in 2008. Wall St. turns wrath, cash on Obama

NEW YORK — Profits and bonuses are down across Wall Street. Banks are slicing jobs and shuttering once profitable trading units in the face of new regulations.

But the financial services industry is poised to set records in one arena in 2012: politics.


The beleaguered sector is pumping tens of millions of dollars into campaigns and newly dominant super PACS as one of Wall Street’s own seeks the White House and the industry looks to roll back key parts of the Dodd-Frank financial reforms. The goal is to oust a president and some members of Congress whom many bankers view as openly hostile toward them.

Employees of securities and investment firms have already given $52.8 million to candidates and party committees in the 2012 cycle, according to the Center for Responsive Politics. That makes it the No. 1 industry, up from fourth place in 2010 and third in the 2008 campaign.

Wall Street — the target of Occupy protests nationwide — has swung firmly back to the GOP in 2012 after supporting then-Sen. Barack Obama over Sen. John McCain in the 2008 campaign. Obama outraised McCain on Wall Street by nearly 2 to 1, $15.7 million to $9.2 million.

Despite a large overall fundraising advantage, Obama has raised just $5.1 million from the finance, insurance and real estate sectors so far this cycle compared with $12.4 million for Mitt Romney’s campaign, according to Sheila Krumholz, executive director of CRP.

“The financial industry overall, cycle after cycle, is always a No. 1 source of campaign funds. It is even more so in 2012. It is head and shoulders above any other industry,” Krumholz said. “And Romney has a large lead, which is extraordinary given that Obama has such a large lead in total receipts.”

Securities and investment firms are the top industry donors to the Republican Party so far this cycle, having given $12.4 million. The industry has given $10.3 million to the Democratic Party, second to $12.7 million from lawyers and law firms.

The gap for Romney, a former private-equity executive and founder of Bain Capital, is even larger when his super PAC — Restore our Future — is included. Restore our Future, which can raise unlimited sums from individuals and organizations, had hauled in $30.1 million by the end of last year.

The roster of big-ticket donors comprises a who’s who list of Wall Street titans: hedge fund giants Julian Robertson ($1 million) of Tiger Management, Paul Singer ($1 million) of Elliott Management, John Paulson ($1 million) of Paulson & Co., Louis Moore Bacon ($500,000) of Moore Capital Management and Paul Tudor Jones ($200,000) of Tudor Investment Corp. Several executives from Bain Capital also wrote checks totaling $2 million to Romney’s super PAC.

By contrast, Priorities USA Action, the super PAC set up by Bill Burton and other former White House officials to support the Obama campaign had raised only about $4.4 million by the end of 2011. There were only a handful of big checks, including $2 million from DreamWorks mogul Jeffrey Katzenberg.

The massive disparity led Obama to reverse course, fully embracing Priorities USA and pledging that administration officials will help raise money for the PAC. Previously, Obama had been sharply critical of the unlimited money the groups have been allowed to raise following the Supreme Court’s decision in Citizens United v. Federal Election Commission.

Obama’s about-face on super PACs came after his handful of remaining wealthy supporters on Wall Street complained they were fighting with two arms tied behind their back.

“After watching all the money spent [by Romney and his super PAC] on negative ads in South Carolina, Iowa and Florida and the number of large donors coming to the table on their side, the view was we were not going to be able to compete with this hand-off approach to the super PAC,” said one senior Wall Street executive who is close the White House.

“It’s not Bill [Burton’s] fault or anyone else’s. But with the Koch brothers and the [Karl] Rove groups and Romney’s super PAC, you are looking at between $600 [million] and $1 billion in super PAC money alone. And if you don’t have the right surrogates showing up to events and don’t feel you have the campaign behind you, you are really isolated,” the executive added.

“That just wasn’t working. Now it should work. And people know, hopefully, that this narrative that the Obama campaign and the [Democratic National Committee] will raise up to a $1 billion and have enough without the super PAC is just no longer valid.”

The passion on Wall Street to defeat Obama is often palpable.

It is not just the provisions of Dodd-Frank that limit proprietary trading or new requirements to hold more capital and employ less borrowed money to juice up returns. It is also the language Obama has repeatedly used to describe the industry, including the infamous “fat cat bankers on Wall Street” quote in a CBS interview. The administration’s slowness to squelch the Occupy Wall Street ferment hasn’t helped either.

More recently, Obama used his State of the Union address to pledge to raise taxes on millionaires and to ensure that at least some bankers are still led away in handcuffs for alleged misdeeds during the financial crisis. Federal securities regulators are preparing lawsuits against Wall Street banks over mortgage bonds sold during the boom years, and banks are paying $26 billion to settle mortgage-servicer abuse cases.

Many on Wall Street say banks that received federal bailouts repaid the money at a profit to taxpayers — unlike the automobile industry — and that both the rhetoric and many of the policies from the White House are divisive and address problems that never really existed.

But mostly it is personal.

“It has very little to do with policy differences — lifelong Democrats don’t start writing checks to Republicans over a call to pay a higher share of societies burdens or Dodd-Frank,” said one executive at a large bank. “Maybe they grouse a bit, but they don’t go over to the other side.”

“The problem for the Obama administration,” the executive continued, “is they went beyond policy disagreement or shared sacrifice rhetoric and decided to use their bullhorn to question the social legitimacy of the very people [who] helped put the president in office. They basically said there was something untoward about how these people earned their keep and supported their families.”

This executive said Wall Street outreach by Obama 2012 campaign manager Jim Messina, including a meeting with a handful of big donors at the Core Club in Manhattan last week, was likely to help somewhat.

Messina promised at the meeting that the campaign would not keep bashing Wall Street, specifically the private-equity industry, which has come under withering assault from campaign spokesmen as a destroyer of jobs in the service of massive profits for private-equity executives.

“If this outreach is undercut by some new turn of invective pointed at the industry from the Obama camp, it will all be over,” the executive said. Obama campaign strategist David “Axelrod can’t have it both ways. You can’t punch someone in the alley and then ask them to buy you a drink at the bar.”

It’s not just the high-flying securities houses, hedge funds and private-equity shops that are angry at the current administration and Democrats in Congress. Many smaller and midsize banks also recoiled over the creation of a powerful regulator in the Consumer Financial Protection Bureau, which they claim has far too much unchecked power and will drive up their compliance costs.

The concern grew only more pointed when Obama took the unprecedented step of installing Richard Cordray as director of the agency without Senate confirmation and without the Senate being in official recess. Banking groups are likely to challenge the legality of the move in court, but it could take months or years for the battle to play out.

“There has been a significant shift in New York away from this president and toward any opponent he may have as a result of his legislative enactments and his relentless anti-Wall Street rhetoric,” said Richard Hunt, president of the Consumer Bankers Association, which represents banks focused on consumers and small businesses.

“The enthusiasm is decidedly down in 2012 for both parties, and the good news for the president is there are fewer people on Wall Street,” Hunt said. “The epicenter for the financial services industry today and for the foreseeable future is the CFPB, CFPB, CFPB and the enormous and unprecedented powers of this new agency.”

In addition to targeting provisions — or the entirety — of Dodd-Frank for repeal, the financial services industry also wants to hold the line on lower tax rates for dividends and capital gains enacted under President George W. Bush.

The private-equity industry is also very eager to maintain the 15 percent tax on “carried interest,” the gains on fund investments that make up the bulk of private-equity executive income.

Obama has vowed to eliminate the Bush tax cuts on high earners and raise the carried interest tax, though such efforts have often been opposed by Democrats in Congress as well as Republicans.

But more than any single issue, the driving force behind the influx of fundraising is a sense of being personally aggrieved.

“Undermining the financial sector — an industry inextricably tied to our economic recovery — won’t create a job or provide economic security for American families facing hardship, yet that is the constant refrain from the White House,” said an industry official. “Many in the industry thought the use of the elevated rhetoric, which was used tactically to demonize the industry and thus enhance the legislative prospects of Dodd-Frank, would cease after the bill’s passage. It hasn’t.”