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Election 2012

Financial industry dollars flow to Republicans in about-face

Mitt Romney
Mitt Romney

Money managers and others in financial services have shifted their support in the presidential election to Mitt Romney, after backing Barack Obama four years ago.

Concern over how the country will deal with the looming fiscal cliff —and the decisions on such issues as the tax treatment of retirement savings, implementation of the Dodd-Frank Act and possible changes to carried interest and other tax rates — are catalysts for the investment and financial services industries to back Mr. Romney following a decades-long tradition of equally dividing financial support between Democrats and Republicans.

“Rather than trying to figure out a way to heal the divisiveness with Wall Street, the president has decided he's anti-business,” said Managing Partner Anthony Scaramucci of SkyBridge Capital II LLC in an interview.

The New York hedge fund executive's defection from being an active fundraiser for Mr. Obama in 2008 to a finance co-chair for Mr. Romney's campaign is perhaps the most dramatic example of the shift away from the president.

Still, other money managers echo his sentiments. “More people have shifted toward Romney lately because of the anti-Wall Street stuff,” agreed a private equity industry insider who did not want to be identified.

Along with disparaging “fat cat” comments, “it's just a feeling that Obama doesn't understand finance,” said another private equity executive.

“The (securities and investment) industry is giving head and shoulders more to Romney,” confirmed Sheila Krumholz, executive director of the Center for Responsive Politics in Washington, which analyzes monthly Federal Election Commission reports filed by candidates.

“Many people read it as an indictment of Dodd-Frank and other financial reform. There was a sense they had their knuckles rapped, and very publicly,” Ms. Krumholz said in an interview.

Wide range

Change of heart graphic

In the 2008 race, Mr. Obama excelled at raising money from individuals of all occupational and economic backgrounds and attracting funds for other Democratic candidates in the process. Overall, in the 2008 election cycle, 57% of donors identified by the center as coming from the securities and investment industries backed Democratic candidates. For the 2008 presidential race, 63% of the $23.7 million donated by securities and investment industry employees and political action committees went to Mr. Obama.

As of Oct. 11, $16.4 million in individual donations from the money management and securities sector has gone to Mr. Romney, compared to $5 million for Mr. Obama, according to a roster of donors from employees of firms including The Goldman Sachs Group (GS) Inc. (GS), Bain Capital, Renaissance Technologies LLC, Clarium Capital Management LLC and Blackstone Group LP, according to CRP data.

Not surprisingly, the biggest switch came from employees ofprivate equity firms. Only 26% of their donations went to Democrats this year, vs. 56% in 2008. And that has put $2.4 million in Mr. Romney coffers, vs. $698,000 for Mr. Obama.

Private equity donors may be backing Mr. Romney after the issue of raising federal revenue by increasing the tax rate on general partners arose in the budget debate. Making a general partner's profit share taxable at regular income tax rates up to 35% instead of the current capital gains rate of 15% would shave $13 billion off the federal deficit over 10 years, the Office of Management and Budget estimated in 2011.

Of the $43 million coming from private equity executives in the 2012 federal election cycle, the most has come from employees of Bain, which Mr. Romney co-founded. Bain employees have given $4.7 million to Mr. Romney's campaign. Other big contributors come from J.W. Childs Associates LP, who have given the GOP candidate $2.8 million. Blackstone employees have contributed $2.44 million and KKR & Co. employers gave $1.96 million to the Romney campaign.

Donations by Bain Capital employees are up dramatically from the $54,000 they gave in 2000, but they have not turned their backs completely on Democrats. Democrats overall have received 41% of what Bain Capital employees gave, down from 69% in 2008.

Employees of other firms in the industry, including Blackstone, Carlyle Group and Warburg Pincus LLC also balance their giving between the parties, while others like KKR do not.

Donors at hedge fund firms are also expressing their dissatisfaction with the incumbent, giving Democrats 24% this election, down from about 67% in 2008.

The biggest difference came not in direct contributions but through donations to the political action committees set up on behalf of candidates and their issues.

Super PACs are a pipeline for donations that indirectly support candidates by financing political advertisements and communication efforts.

Nearly half the money in Mr. Romney's Super PAC — Restore Our Future — came from people in the securities and investments sector. They gave $27.4 million as of Oct. 1, much more than the $12 million given directly to the candidates.

According to FEC data as of Oct. 1, top multimillion-dollar Super PAC donors to Mr. Romney include Peter Thiel, president of Clarium Capital Management; James Simons and Robert Mercer, co-CEOs of Renaissance Technologies; and John Childs, chairman and CEO of J.W. Childs.

In 2011, 84% of Mr. Romney's donors chose the Super PAC route, with four of the five $1 million gifts coming from hedge fund managers Paul Singer, CEO of Elliott Management Corp.; John Paulson, president of Paulson & Co.; Julian Robertson, chairman of Tiger Management Corp.; and Edward Conard, former Bain Capital managing director, according to an analysis by Democracy 21, the Campaign Legal Center and the Center for Responsive Politics.

Priorities USA Action is a Super PAC supporting Mr. Obama. Donors include Renaissance Technologies co-CEO James Simon, who gave $2 million, and Ariel Investments Chairman and CEO John Rogers Jr., who gave $100,000.

In addition to Super PACs, the big money comes from bundlers, who reach out to friends and contacts and host gatherings where donors can meet the candidates.

Some 638 bundlers have brought in $143 million for Mr. Obama. He has received $20 million from the securities and investment sector, led by Mr. Rogers and President Mellody Hobson of Ariel, who gathered $1.6 million; Michael Sacks, CEO of hedge funds-of-funds firm Grosvenor Capital Management LP, $1.3 million. All declined to comment or didn't return calls seeking comment.

The Romney bundler picture is incomplete because campaign officials declined to disclose donations by anyone but registered lobbyists, 34 of whom have raised $5 million so far.

This article originally appeared in the October 15, 2012 print issue as, "Financial industry dollars flow to Republicans in about-face".