The close relationship between Wall Street and Washington insiders is amply demonstrated by the massive amounts of money that employees, their family members and the political action committees of securities and investment firms have pumped into presidential and congressional campaigns–particularly the campaigns of President Barack Obama.
In the 2008 campaign, Obama, who did not accept matching funds for the primaries or a grant from the Presidential Election Campaign Fund for the general election raised a record $745 million from private sources for the primaries and general election. In his early fundraising, Obama has relied even more on Wall Street, an analysis by the Center for Responsive Politics showed.
Wall Street of course is an imprecise term, and CRP’s analysis looks at contributions from individuals employed in the Finance, Insurance and Real Estate sector, which is, they note, “far and away the largest source of campaign contributions to federal candidates and parties…” Politicians–presidential and congressional candidates–fundraise from Wall Street for the same reason Willie Sutton robbed banks: That’s where the money is.
Of course, financial interests don’t contribute to politicians out of the goodness of their hearts. Wall Street has tremendous influence in Washington–and has for ages. When Teddy Roosevelt wanted to break up a railroad trust put together by financier J.P. Morgan, whose name still graces one of the biggest bank holding companies in the United States, told the President, “If we have done anything wrong, send your man to my man and they can fix it up.” Roosevelt declined the offer and went after the trust.
That story stands out because it’s so rare. Washington has generally been willing to listen to Wall Street, especially over the last four decades, when a series of legislative and regulatory changes–capped by the repeal of the Glass-Steagall Act in 1999–made Wall Street the repository of more money than ever before. Or, as the Financial Crisis Inquiry Commission noted in its final report, “On the eve of the crisis in 2006, financial sector profits constituted 27% of all corporate profits in the United States, up from 15% in 1980.”
Those changes didn’t come about without the deep pockets of Wall Street playing a role. Gramm Leach Bliley–the act that repealed Glass Steagall–was passed in 1999. The financial sector pumped more than $316 million into campaigns for federal office in 1999 to 2000, nearly double the $177 million it contributed in 1996, and spent more than $200 million lobbying in 1999. Sen. Phil Gramm, the bill’s Senate sponsor, raked in more than $719,000 from the industry (he wasn’t up for reelection until 2002). Sen. John McCain, R-Ariz., who was seeking the Republican presidential nomination, took in $2.7 million from financial interests, while on the House side Rep. Charles Rangel, D-N.Y., raised more than $533,000.
In 2010–another banner year for Wall Street fundraising–Congress passed the Dodd-Frank Consumer Protection and Wall Street Reform Act. Part of the act instructed federal agencies to implement the “Volcker Rule,” named for former Federal Reserve Chairman Paul Volcker. The rule would limit the ability of banks to make certain investments–mostly in hedge funds and derivatives–that do not benefit the bank’s customers. The American Bankers Association, which opposes the rule, recently leaked an explanation of the proposed rule prepared by officials in Treasury, the SEC, the FDIC and the Federal Reserve. The word “exemption” appears more than 400 times.
Financial sector interests contributed $317 million to federal candidates and committees in the 2010 election cycle according to the Center for Responsive Politics, with Sen. Charles Schumer, D-N.Y., getting the most, more than $5.4 million. Among the top ten recipients were super committee members Rob Portman, R-Ohio, and Pat Toomey, R-Pa.
In 2012, the fundraising continues apace. The top recipient so far? Presidential candidate and current Republican frontrunner Mitt Romney, who’s taken in $5 million.