Bankers No Longer Feel So Welcome at Political Conventions

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Four years is a long time, but even longer when comparing banks' relationship with Washington since the last round of political conventions.

How much has changed since Barack Obama and John McCain were formally nominated in 2008? Just a global financial crisis, the longest wave of bank failures since the savings and loan debacle, an unprecedented bailout and a just-as-unprecedented regulatory overhaul.

With the industry still fragile, many banks that had been a mainstay of past conventions are passing on the Republican gathering in Tampa starting Monday, and the Democratic convention in Charlotte the following week.

"In this economic environment, there is a major drop-off in participation by financial institutions," said Richard Hunt, president of the Consumer Bankers Association.

Let's compare that just to the 2008 Democratic convention in Denver. Bank of America, which would soon have a shotgun wedding with Merrill Lynch and then get a $45 billion lifeline from the government, was honored with a glitzy party. In attendance — to celebrate B of A's investments in green technology — were Democratic members of Congress and liberal celebrities such as Susan Sarandon.

Long before any derivatives trading losses in its London investment office, JPMorgan Chase hosted a reception for female governors during the Democratic gathering. Attendees included Janet Napolitano and Kathleen Sebelius, now, respectively, the secretaries for homeland security and health and human services. Before becoming President Obama's first chief of staff, up-and-coming Democratic Rep. Rahm Emanuel was also at the party, speaking to the press about his longstanding friendship with the bank's chief executive, Jamie Dimon.

"They are a very important financial institution in troubled times for the financial industry in America," Emanuel said.

The industry's top concerns about a potential Obama administration involved credit-card regulation, which was enacted the following year, and attempts — ultimately unsuccessful — to allow bankruptcy judges to "cram down" mortgage debt. But both were later overshadowed by other seismic changes in banking.

While there was recognition in Denver that the banking sector was facing trouble, no one foresaw the magnitude of the crisis that would hit the following month.

"The storm hadn't quite come ashore," said Cornelius Hurley, director of the BU Center for Finance, Law & Policy at Boston University, "but there was a lot of fear and foreboding."

Referring to what has happened since then, Hurley said, "It's been mind-boggling."

There have been two key developments in the industry's relationship with politicians since 2008. First, the industry's backlash against the Dodd-Frank Act, enacted at a time when Democrats controlled the White House and both houses of Congress, has brought banks closer in alignment with one political party — the GOP — than at any time in recent memory. Financial regulation was not an overly partisan issue for most of the 1990s and 2000s, but it is today.

This trend can be seen most plainly in the industry's campaign contributions. In this year's election cycle, commercial banks are favoring Republicans over Democrats by a larger percentage than in any election since at least the 1980s, according to campaign finance data from the Center for Responsive Politics.

The second shift is the public's growing suspicion of banks as financial regulation has generally become a more prominent political issue. A June 2012 Gallup poll found that only 9% of Americans have a great deal of confidence in banks, the second-lowest mark since polling began in 1979. (Congress still scored lower.)

What does this mean for the 2012 conventions? Perhaps most notably, the banking industry will be trying to keep an even lower profile. Bankers and industry representatives had already begun to stay out the spotlight in 2008. But their caution appears even more pronounced this time around.

Some industry lobbyists say they're skipping the quadrennial galas for the first time in decades. Budgets are tighter than they were in the high-flying days of the ‘90s and ‘00s, they explain, when the industry was throwing parties at the conventions costing hundreds of thousands of dollars.

They also point to rules — enacted after the 2004 conventions — that prevent industry groups from throwing parties for individual lawmakers, as well as the fact that numerous members of Congress are skipping the conventions. Yet another factor may be that lawmakers are less eager to be seen with bankers than they once were.

"I didn't think it was the best investment of our resources this year," Hunt said of the CBA, which will not be attending.

After being a no-show in 2008, the American Bankers Association has also opted to stay clear of the upcoming conventions.

"The conventions, while helpful, are certainly not as useful for getting work done as they have been in the past," said James Ballentine, the ABA's executive vice president for congressional relations and political affairs.

To be sure, there will still be an industry presence at both conventions, assuming the forecasts of Tropical Storm Isaac potentially hitting Florida do not scuttle the GOP's gathering.

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Comments (1)
It's kind of tough. First the remnants of the crash and bail, then the knowledge of direct and overwhelming amounts of money to one party!

The banks don't owe apologies. They do need to understand that very volatile sensitive derivative product with Notional and Listed derivative product needs real oversight and Public Exchanges with mark to market and margin calls daily. It's not easy to swallow but it will make the banks trusted once again. The view of some is the income is so vast that Top Executives want just a couple years. I that know some executives are incredible talents. Jamie Dimon is incredible!, and he was willing, against his personal political beliefs, point out weaknesses in this government's policies. That's brave! The rest of the leaders of the Banks and we know who they are! Should be as brave and independent!
Posted by hedger | Saturday, August 25 2012 at 6:21PM ET
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