'It Can't Get Any Worse': Why Banks Are Making a One-Sided Political Bet

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WASHINGTON — In a sign of how angry many bankers are after the passage of Dodd-Frank, the industry is backing Mitt Romney and the Republican National Committee by a nearly 2-to-1 margin through political donations in the 2012 campaign.

Though some may see it as a political risk — especially given that President Obama is still considered the favorite in this race — bankers argue they see only upside, and little potential backlash, from their support of the president's rival.

"There are a lot of bankers who feel that it can't get any worse," said Howard Headlee, president of the Utah Bankers Association, who has formed a political action committee. "What more can this administration do to our industry? Are they going to be more hostile than they are, more critical than they already are, impose more regulatory burdens than they already have?"

There are several reasons why the industry's strategy may be valid. Obama has already passed a major financial-reform law, so it's hard to imagine that he'll try to pass another overhaul.

And while perceptions vary widely about how much pain the Dodd-Frank Act is causing the banking industry, there is little doubt that a second-term Obama will fiercely defend the law, no matter how much money he raises from bankers.

The possible benefits of supporting Romney, meanwhile, are obvious. A Romney administration would support policies more favorable to banks than Obama would in his second term.

Furthermore, it is unlikely that the banking industry, which plays such a key role in the U.S. economy, will get shut out of the policy-making process if Obama wins in the way that a smaller industry might. Conversely, it is not clear whether bank industry support for the president's re-election effort would yield many concrete benefits.

"The problem for bankers is that even if they give money to Obama, they probably are not buying anything other than courtesies that don't mean much in terms of policy," said Larry Sabato, director of the University of Virginia Center for Politics.

The banking industry's strong backing of Romney in 2012 marks a sharp reversal from four years ago.

In 2008, commercial banks and their employees gave $3.4 million to Obama and $2.4 million to Republican nominee John McCain, according to data from the Center for Responsive Politics, though the RNC raised about $1 million more from commercial banks than the Democratic National Committee did.

Looking more broadly at contributions from the entire financial sector, Obama's advantage in 2008 was larger. He raised $42 million from the sector, compared with $31 million for McCain. For Obama, that $11-million advantage has turned into a $10-million deficit in 2012, according to campaign-finance records.

The banking industry's distaste for Obama reached the point recently where a Goldman Sachs executive joked publicly that the firm has banned its employees from supporting the president's re-election campaign, prompting CEO Lloyd Blankfein to make clear that Goldman employees can give to whomever they want.

The reasons for the industry's shift away from Obama are complicated — a mix of hard-headed calculation and a more emotional response to the president's public criticism of banks.

Headlee, a Romney supporter whose family has been connected to the Romneys since the 1960s, when his father held a high-ranking position on George Romney's presidential campaign, expressed the frustration that many bankers feel with President Obama.

"We're at the heart of the community, we're at the heart of the economy," Headlee said. "And they seize at opportunities to attack banks, and then they wonder why the economy is struggling."

Ralph "Chip" MacDonald, an industry lawyer at Jones Day, shares the view that banks risk little by supporting Romney.

"What do they have to lose at the moment, since the administration has been so vocal in criticizing the financial services industry?" he asked.

Cornelius Hurley, director of the Center for Finance, Law & Policy at Boston University, is not very sympathetic to the complaints of bankers, arguing that financial reform should have gone farther than it did. Still, he said that following the passage of Dodd-Frank, the industry has strong reasons to turn its back on Obama.

"We're not even halfway through the rulemaking," Hurley said, "and it's clear that the banking industry's profits aren't going to be what they were."

Blair Bowie, who works on campaign-finance issues for the U.S. Public Interest Research Group, which advocates for tough financial reforms, agreed that the banking industry is being rational in its support of Romney.

She expressed doubt that if banks were to support Obama, there would be much impact on his second-term policies.

"What it says more to me is that the financial industry wants Mitt Romney in office," Bowie said.

This year's contribution patterns mark a return to historical partisan norms, with 2008 looking like an outlier. Campaign-finance records from the last six presidential elections show that the contest four years ago was the only time that commercial banks gave more money to the Democratic nominee.

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Comments (3)
The comment quoted from the Goldman exec seems typical. In the meantime, the Goldman boys and the rest of that vast host of shady or crooked companies who got away with trashing the economy for their short term benefit fail to appreciate that the continuation of their industry, their continued employment, not to mention their obscene pay and bonuses, not to mention their freedom (due to an almost complete failure to prosecute), and not to mention their still inadequately regulated workspace which makes future profitable risk taking possible, is due to Obama (or at least his Wall Street advisers). Nice way to say thanks, guys.
Posted by j.doe | Monday, May 07 2012 at 10:01AM ET
The Banking industry is forgetting the violent emotional response the public has to the conduct of the banks, be they real banks or investment banks, both during and after the crisis. Then of course, there is the belief that the crisis was caused by Bankers greed for bonuses and high compensation.

The $GSs of the world don't care about public opinion because they cater to other Bankers and wealthy investors, not the voting public. It's almost that were have two parallel financial systems, one which can trump the other. Public Banking (retail and SMB comm'l) and Private/Investment Banking. Unfortunately the lines are blurred with a $BAC or $JPM where the Investment Banking produces huge revenues for the shareholders regardless of the cost to the public. Dividends may remain low, but the trades are the game.

Sure, the President is supportive of regulations to keep the banks in check but so are many economists. Dodd-Frank-Volcker is very unpopular with banks but we cannot afford self regulation and end up with 2008 redux. The elimination of Glass-Steagall and a passive SEC proved that only strong regulation will keep the general public safe. The trickle down theory only works when it's a steady stream down, not a huge damn holding back profits for the "so-called 1%" (a ridiculous label but...).

It won't happen but the ABA should launch a MASSIVE PR campaign to explain and show that the banks are necessary to HELP the recovery. That should be easy. Showing the Banks doing it, bu lending to small business, lowering fees on transactions, offering public education/awareness classes on the theory of money etc.

Until the Financial Sector is willing to admit that the public matters, it will spend millions backing the candidate that they perceive will be the most lenient. The majority of voters will, hopefully, back the candidate they believe will help the average citizen.

Richard Isacoff
isacofflaw@msn.com
Posted by riisacoff | Monday, May 07 2012 at 10:32AM ET
Richard,
The industry is moving toward a more publicly-focused mindset, albeit slowly - see the Partnership for a Secure Financial Future http://ourfinancialfuture.com/ and the Hamilton Financial Index report.
I agree, there needs to be a much more robust, national PR campaign with the industry working together to tell the story of how financial institutions are essential in aiding recovery and the economy in general.
Patrick Sims
psims@hamiltonps.com
Posted by @Patrick_J_Sims | Monday, May 07 2012 at 3:11PM ET
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