Jonathan Chait

Wall Street's Political Turn

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The Wall Street Journal has an excellent report detailing the financial industry's sharp turn away from the Democrats and toward the Republicans, in response to the Obama administration's plans to regulate them and tax them at higher rates:

Managers of hedge fundsprivate investment partnerships that cater to institutions and wealthy peopleare reacting to what some criticize as Mr. Obama's populist attacks on Wall Street, as well as to Democrat-led efforts to raise their tax bills. They had hoped to be protected from such a tax move by their relationships with prominent Democratic members of Congress. "Hedge funds bankrolled the Democrats in the 2006 and 2008 elections, and the very people they helped put in power turned around and screwed them," said Sam Geduldig, a former Republican congressional staffer who is a Wall Street lobbyist. ...

53% went to Republicans in the 2010 election cycle, when hedge-fund managers' and employees' donations totaled $11 million. GOP strategists credit a core group of fund managers for helping Republicans win control of the House, make inroads in the Senate and drive Mr. Obama toward the political center.

A half-dozen fund managers donated a total of $6 million to the Republican Governors Association in the weeks before the 2010 election and spent millions more to finance a blitz of ads for Republicans running for Congress.

The shift started near the end of the 2008 campaign, when Mr. Obama began blaming hedge funds for some of the country's economic problems.

You may remember that, during the financial reform debate, the conservatives who were not calling Obama a radical destroyer of business were calling him a Wall Street lapdog. Here, for instance, is a column last year by Tim Carney:

For his presidential campaign in which Wall Street regulation was a mantra, Obama's top source of funds was investment bank giant Goldman Sachs, whose employees, partners, and executives gave him $995,000 -- that's the most any politician has raised from any one company in a single election since the age of "soft money" ended.

Obama is touting his proposed bank tax and financial regulations as a test of "whose side" politicians are on -- the bankers' or the people's. But check the numbers at OpenSecrets.org, and you get an interesting clue as to whose side Wall Street on.

The "securities and investment" industry has favored Democrats by more than a two-to-one margin so far this cycle. The top eight recipients of Wall Street PAC money this election are all Democrats. ...

The press will follow Obama's rhetoric over the coming months, and paint him as the scourge of Wall Street. It's more illuminating, though, to follow the legislation -- and follow the money.

It's pretty clear, in retrospect, that this argument was built almost entirely on a analysis of Wall Street's giving that was no longer true at the time. 

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