WASHINGTON - With control of the White House and the House of Representatives on the line, the political parties are sparing no expense in the November elections, and their favorite source for campaign contributions is financial services firms, which donate more than any other industry sector.

Led by Goldman Sachs Group Inc., Citigroup Inc., and Bank of America Corp., financial services companies and their employees have contributed $94 million to presidential and congressional candidates so far in this two-year election cycle, according to Federal Election Commission data compiled for American Banker by the Center for Responsive Politics.

With two months to go until election day, that's already more than brokers, insurers, and bankers donated in the previous election cycle ($84.7 million) or in the 1995-96 cycle ($91.4 million) when the last presidential election occurred.

"This is truly a big election," said Larry Makinson, executive director of the Center for Responsive Politics. "We know we're going to have a change in administrations, we just don't know how radical a change it is going to be, and control over the House is at stake, too."

While financial services is putting more money behind Republicans and their nominee Texas Gov. George W. Bush, Mr. Makinson said its giving is more bipartisan than most other industries.

The drive for dollars has never been fiercer.

"Even I have to say the money has gotten so out of hand," said James J. Butera, a partner with Butera & Andrews who specializes in financial services law and has been raising money for politicians since 1972. "People expect it and need it because the campaigns are so expensive.

"I don't think you can be taken seriously if you are not giving major dollars as a company, as an industry, as an individual."

Securities firms and their executives are definitely taken seriously. They are solely responsible for the surge in donations by financial services firms during this election cycle.

Giving more than insurers and bankers combined, brokers had contributed $50.68 million as of Sept. 1. Insurance companies had chipped in $28.87 million while bankers had ponied up $14.4 million. Donations by securities firms are up 33.5% so far this election cycle compared to 1997-98 totals. However, insurers are 5.2% off their 1997-98 pace and bankers are off 11.5%.

But taken together, Mr. Makinson said the financial sector is the leading source of funds for federal candidates. "Financial services companies certainly understand the value of an investment and that's how they look at political contributions, as an investment," he said.

The Center for Responsive Politics is a nonpartisan, nonprofit group here that investigates the influence money has on politics. (See www.opensecrets.org.) The center breaks down corporate giving into three categories: money contributed by individuals affiliated with a firm, money contributed directly by a company, and money contributed by a company's political action committee.

Interestingly, brokers, insurers, and bankers each have a different preferred method of giving.


Goldman Sachs Group was the clear leader among securities firms with $2.45 million in campaign contributions, of which $1.81 million went to Democrats. In fact, the only top Goldman executives to donate to the Republicans are chairman and CEO Henry M. Paulson Jr., who gave $10,000, and vice chairman Robert J. Hurst, who gave $15,000, to the Republican National Committee.While Bear Stearns and Lehman Brothers, like Goldman, leaned Democratic, the bulk of the brokerages favored Republicans.

After Goldman, the next five largest contributors among securities firms all gave more money to Republicans than Democrats. For example, Morgan Stanley, ranked second among brokers overall with $1.33 million in contributions. Of that, Republicans got $861,320. Merrill Lynch, PaineWebber, Credit Suisse First Boston and Axa Financial all favored the GOP.

Further down the list, Charles Schwab & Co. sent 95% of its $529,200 in contributions to Republicans.

The securities industry's muscle comes from individual donations - one of three main ways to raise and distribute funds. Of its more than $50 million in contributions, nearly 55% came from individuals.

People connected to Goldman have contributed $1.83 million, a sum that dwarfs donations from rivals in the insurance and banking business. Employees at each of the next two largest securities contributors - Morgan Stanley, Dean Witter and Merrill Lynch - have contributed more than $750,000.

Why do securities executives prefer to contribute directly to a political candidate than to a company's soft dollar donations or its PAC?

Rivals claim it is because brokers are paid so much more than insurers or bankers. But Marc Lackritz, president of the Securities Industry Association, said the answer goes beyond compensation.

"There are differences in the cultures of the industries and they are reflected in the way they give money," he said. "This industry is quite entrepreneurial and it's quite decentralized."


Though the securities industry relies heavily on donations by employees, the insurance industry draws its clout from soft money. Nearly 41% of its $28.87 million in donations was in soft money.There are no limits on the amount of soft money that may be contributed, but these funds may not be used to get a specific candidate elected. Soft money is used by the political parties to pay for such things as issue advertising and voter drives. (Loopholes in these restrictions are what makes soft money the target of campaign finance reform efforts). By contrast, the Federal Election Campaign Act of 1971 caps hard money donations at $1,000 per candidate per election ($2,000 total for a primary and a general election), $5,000 per year to a PAC, and an aggregate limit of $25,000 per year to all federal candidates, parties, and PACs.

Citigroup led all insurers with $2.07 million in contributions, with just over $1.1 million in soft money donations. (The Center for Responsive Politics breaks down Citigroup's donations by type of financial service. For example, Salomon-Smith-Barney's contributions are included in the securities industry's total.)

Aflac Inc. ranked second among insurers with $1.452 million while Blue Cross/Blue Shield companies were third with $1.448 million. Both firms gave nearly 60% of their contributions as soft money. Rounding out the $1 million-plus insurance donors are American Financial Group (75% as soft money) and American International Group (66%). With the exception of Citigroup, these insurers all gave more money to Republicans than Democrats.

Citigroup favored Democrats over Republicans, but not by as much as might be expected considering its leaders are active in the party. Chairman and chief executive Sanford I. Weill personally called President Clinton in 1998 to let him know about Travelers Group's merger with Citicorp. Robert E. Rubin, a longtime Goldman Sachs executive, was Treasury secretary from 1995 to 1999 before joining Citigroup last October as a nonexecutive member of the office of the chairman.

Roughly 57% of Citigroup's contributions went to Democratic candidates or groups connected to the party.

According to the center's data, Mr. Weill has not directly contributed to Vice President Gore's campaign. In fact, Mr. Weill gave $1,000 to his challenger Bill Bradley during the Democratic primary. One Republican received a donation from Mr. Weill: $1,000 to Senate Banking Committee Chairman Phil Gramm.

A former Citigroup executive, Jamie Dimon, now chairman and CEO at Bank One Corp., gives more money to political causes than any other financial services leaders. During this cycle, Mr. Dimon and his wife, Judith, have given $146,500 to Democratic groups or candidates. (Although both also gave $1,000 each to Gov. Bush.) Through a Bank One spokesman, Mr. Dimon declined an interview request.

Citigroup is the only financial services firm to make the Center for Responsive Politics' top-20 list of donors to both parties, ranking 11th among donors to the Democratic Party at $708,125 and 14th to the Republican Party at $574,225.

Insurers may use more soft money than their rivals because more of these companies are mutually owned and therefore do not face shareholders complaints about spending the company's money on political ends. But Robert A. Rusbuldt, a long-time industry lobbyist and fund-raiser, also noted that soft money is easier to raise. "Many times it is easier for large corporations to use corporate soft money than it is to solicit their own employees," he said. "It takes a long time to raise PAC money from employees."

Besides, when campaigns cost $20 million, companies sending small checks from executives or from their PACs are "spitting in the ocean," according to Mr. Rusbuldt, who is executive vice president of the Independent Insurance Agents of America.


Commercial banks generally favor the third way of making campaign contributions - through political action committees - but it may be more out of necessity than choice.Seven of the 10 largest bank contributors gave more money through their PAC than as soft money or individual donations. Bank of America led the industry with $1.16 million, of which $673,645 was collected by its PAC.

Chase Manhattan Corp. was second with $714,119 in donations spread over all three forms of giving. Bank One ranked third with $686,800, nearly 80% through its PAC. First Union Corp. and J.P. Morgan & Co. rounded out the banking industry's top five, giving $651,437 and $592,095, respectively.

The top-five contributors among commercial banks all favored Republicans over Democrats.

Bank of America gave roughly 57% of its money to Republicans, Chase 65%, Bank One 80%, First Union 83%, and J.P. Morgan 55%.

The next four largest bank contributors favored Democrats, including FleetBoston Financial Corp. (71% of its $319,050), Providian Financial Corp. (51% of $315,250), Deutsche Bank North America (55% of $305,737), and Wells Fargo & Co. (55% of $303,614). Mark Leggett, Bank of America's director of federal government relations, praised PACs because they represent mostly small checks from many individuals. But he acknowledged it is tougher to raise PAC money than getting a few people to write large checks. "I wish that the banking industry could compete with the securities industry, but it's clear that we cannot," he said. "There are some folks who if they didn't give to the PAC, they wouldn't give at all.

However, the banking industry may not be disadvantaged by the larger contributions of the securities and insurance industries.

Lawmakers have drawn fewer distinctions among banking, securities, and insurance lobbyists since the 1998 merger of Citicorp and Travelers, and last year's enactment of the Gramm-Leach-Bliley Act, which allows mergers among the industries. "In the eyes of many members [of Congress] we're all the same," Mr. Leggett said.

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