When the head of JPMorgan Chase met with shareholders to answer for a trading loss of more than $2 billion Tuesday, it was against an evolving political backdrop: Donors from big banks are betting on Mitt Romney to defeat President Obama and repeal new restraints on risky, large-scale investments.
“There’s no doubt that there’s been a big diminution of support for the president,’’ said William M. Daley, Obama’s former chief of staff and a former top JPMorgan Chase executive. “People in the financial services sector are saying, ‘The president has been too tough on us, both in policy and on rhetoric.’ ’’
The top five donor groups in Romney’s campaign are individuals and political action committees associated with large financial institutions, led by Wall Street giants Goldman Sachs and JPMorgan Chase, according to information compiled by the Center for Responsive Politics, a nonpartisan research group that tracks campaign donations.
By contrast, Obama’s top five contributor groups include individuals and PACs affiliated with high technology giants Google Inc. and Microsoft Corp., and the global law firms DLA Piper and Sidley Austin, and do not include those associated with banks. In 2008, financial institutions backed him generously.
Analysts said the JPMorgan loss could be a political opportunity for Obama - and an obstacle for Romney.
On Monday, Obama was already seizing on the JPMorgan loss to bolster his reelection effort and underscore his continuing support for new and pending financial regulations in the 2010 Dodd-Frank regulatory overhaul, which includes the controversial Volcker Rule, a provision that would prohibit banks from making speculative investments with their own funds.
“This is the best, or one of the best-managed banks. You could have a bank that isn’t as strong, isn’t as profitable making those same bets and we might have had to step in,’’ Obama said on ABC TV’s “The View,’’ adding praise for JPMorgan chief Jamie Dimon. “That’s exactly why Wall Street reform is so important.’’
The JPMorgan loss “certainly fortifies the argument for stricter financial regulation,’’ said William A. Galston, a senior fellow at the Brookings Institution and former adviser to President Clinton. “And since President Obama has been on one side and Mitt Romney has been on the other, you would have to say it will make it a little bit harder for Mitt Romney to fortify the position he has articulated, which is that Dodd-Frank should be repealed.’’
Campaign finance records also show that the financial services sector is, to some extent, hedging its bets by donating money to the Democratic National Committee.
During the 2012 campaign, the securities and investment industry has donated nearly $10 million to the DNC, or about 10 percent of the total it has raised, and only about $4.5 million to the Republican National Committee - a disparity that could be explained by the fact that Romney only recently became the presumptive Republican nominee.
“Because there’s been no clear Republican nominee until recently, there’s been no opportunity to leverage donations,’’ said Bob Biersack, a senior fellow at the Center for Responsive Politics and a former staffer at the Federal Election Commission. “Now I think everyone would expect donors from banks and securities firms to start showing their support for Romney by giving to the RNC, too.’’
When it comes to outside spending - the unlimited funds donated by corporations, labor unions, and individuals to the super PACs associated with Romney and Obama - the advantage again tips toward Romney.
Records show that the securities and investment industry has given nearly $20 million to Restore Our Future, the independent super PAC associated with Romney, while it has contributed less than $200,000 to Priorities USA Action, the super PAC associated with Obama.
During the last presidential race, as of March 2008, four of Obama’s top five donor groups were individuals and PACs associated with financial institutions. Indeed, Goldman Sachs led the list and JPMorgan Chase was third. Some political analysts say Obama attracted significant backing from the financial services sector four years ago in part because he was the clear front-runner through much of the campaign, and in part because he was a political unknown without a clear record on issues of concern to large-scale investors.
“A lot of business money simply follows the winner,’’ said Rob Gray, a Boston political consultant who was an adviser to John McCain’s 2008 campaign. “Four years ago, a lot of the banking money went to Obama because he was the presumed winner far in advance of Election Day.’’
Analysts also note that Romney is receiving broad support from the financial services sector because he made his career there as a private equity innovator with Bain Capital, and because Republicans generally tend to win support from business leaders.
“It should come as no surprise to anyone that the financial services sector is more comfortable with a Mitt Romney than it is with the president,’’ said Daley, noting his own status as a self-described Democratic “odd duck’’ in the world of high finance.
But political analysts also say that Obama - who once referred to Wall Street financiers as “fat cat bankers’’ - is losing support from individuals and PACs associated with large financial institutions specifically due to his support for the Dodd-Frank bill and the rhetoric he and other Democrats have used in assessing blame for the 2008 financial crisis, which stemmed from high-risk investments made by large financial institutions.
“It’s pride more than anything,’’ said US Representative Barney Frank, the Newton Democrat who coauthored the new regulations. “They don’t like the Volcker Rule but I don’t think they can argue that we’ve wrecked their business or made it impossible for them to function. I think it’s more emotional than anything else.’’
On Monday, the Romney campaign said JPMorgan’s $2.3 billion trading loss would be absorbed by shareholders, not taxpayers, adding that Romney favors some regulations on risky trades by large financial institutions - just not many of those embedded in the Dodd-Frank law.
“As president, Governor Romney will push for common-sense regulation that gives regulators tools to do their jobs, and that gives investors more clarity,’’ said Andrea Saul, the spokeswoman for the Romney campaign.
Still, political analysts say that a debate over the regulation of complex financial investments by large financial institutions could well be overshadowed by economic news about jobs and mortgage rates, particularly if the larger economy falters, something that did not occur until late in the 2008 presidential campaign.
“The question is whether the JPMorgan trading loss or any other future hiccups on Wall Street boil down to the everyday economy,’’ said Gray, the Republican political consultant. “Anyone who says they know what the economic news is going to be in the fall, doesn’t know what they’re talking about.’’