Wall Street backs also-rans in US election

The Telegraph ^ | 1/9/08 | James Quinn

[bruinbirdman]

Financiers' donations to US presidential candidates may have gone to the also-rans.

Until recently, little was known of SAC Capital hedge fund manager Ping Jiang other than his alleged harassment of colleague Andrew Tong. That case - which Jiang denies - centres on accusations he told Tong to take female hormones and wear women's clothes.

But now Jiang is of interest for another reason. He is one of the thousands of Wall Street types taking an active role in the presidential election cycle by backing candidates with his own money.

But while Wall Street likes to back winners in the markets, the biggest political donations look to be staked on the losing horses. In June 2007, Jiang donated $2,300 - the maximum that one person can donate to a candidate per election cycle - to then Democratic presidential hopeful Senator Christopher Dodd's election campaign.

Jiang's donation was not the only one from his firm to Dodd. In fact, Federal Electoral Commission records show that of the 159 donations made by SAC staff, 141 were to Dodd, totalling $274,100.

The fact that billionaire SAC founder Steve Cohen is one of the 141 donors is perhaps an indicator as to why the majority of his politically minded staff seem to be backing Dodd, as is the fact that Dodd, as chairman of the Senate Banking Committee, will be influential in any reforms to taxation for the hedge fund industry.

That such an unlikely candidate - Dodd quit the race after winning less than 1pc of the Democratic vote in the Iowa caucuses - received so much money from a large hedge fund highlights the apparent mismatch between where financiers have been donating their cash and who the public thinks will win.

To further demonstrate this, according to data from the Center for Responsive Politics (CRP), Dodd has been one of the top recipients of donations from Wall Street.

Although his campaign has now ended, Dodd raised a total of $13.6m in the first three quarters of 2007 - the most recent available data - with $2.61m coming from the securities industry and a further $1.16m from insurance and commercial banking.

Leading the fundraising race is Hillary Clinton, who, by October, had raised $90.93m. Second was Barack Obama, with $80.25m. Republican Mitt Romney was third, with $62.83m.

In total, by the end of the third quarter, the then 16 presidential hopefuls had raised a total of $420m, with the CRP suggesting the "presidential money chase seems to be on track to collect an unprecedented $1bn total".

Of the $420m collected so far, $146m has come from the financial and real estate community, highlighting the importance of bankers and financiers to presidential race.

Massie Ritch, the CRP's communications director, said that by the end of the third quarter - 37.5pc of the way into the 2008 election cycle - the finance and real estate sector had donated 43.5pc of the $339m they donated in 2004, suggesting more money will be donated this cycle.

And, for the first time since the 1990 mid-term elections, individual donors from financiers and real estate moguls are going Democrat, rather than Republican. The latest data shows 55pc of the $146m donated so far has gone to Democrats, with the remaining 45pc headed for Republican hopefuls.

However, the CRP's Ritch says such a swing should not be over-analysed: "When the Democrats took control of Congress in 2006 and the power shifted, the money started shifting too."

And for those in securities and investments - the CRP category most closely related to Wall Street's investment houses - Clinton is the top choice, having raised $4.75m from Wall Street against Obama's $4.56m.

Big-name donors to Clinton include Morgan Stanley boss John Mack, and his opposite number at Goldman Sachs Lloyd Blankfein. Both gave the maximum individual amount - $2,300 - last year.

Other leading financiers apparently backing Clinton, based on donations, include JP Morgan Chase head Jamie Dimon. Dimon, however, is the Federal Reserve's board, so cannot endorse any single candidate, instead opting to back a range of candidates.

In this regard, he also provided money to Dodd's now-defunct bandwagon, as did Blankfein. Ex-Citigroup chief Charles "Chuck" Prince also donated to Dodd, but his replacement, Vikram Pandit, has not made a political donation since 2005.

Although Obama has considerable grassroots support on Wall Street, he has, based on the most recent filings, failed to attract any big-name investment bank heads other than departed Merrill chairman Stan O'Neal.

However, his campaign has received money from billionaires such as Warren Buffet and George Soros, showing perhaps, given Obama's current poll lead, that they are shrewd political pundits and shrewd investors.

Republican hopeful John McCain is the other contender with major Wall Street support. He can count on Merrill Lynch boss John Thain and former AIG chief Maurice "Hank" Greenberg, as well as former New York Stock Exchange head Dick Grasso and Charles Schwab, chairman of the share dealing firm that bears his name.

Republican hopeful Rudy Giuliani, New York's former mayor, has obvious Wall Street connections, with support from Greenberg and Grasso, as well as activist investor Carl Icahn, real estate magnate Sam Zell and Ted Forstmann, founder of private equity house Forstmann Little.

However, top Republican contender Mike Huckabee has pitched his stance as firmly anti-Wall Street, and failed to attract any big-name backing, instead trying new forms of fundraising. That could change if he wins his party's nomination, at which point most major names would most likely fall in line.

What is clear is that in spite of the huge amounts of money being invested in the election race by New York's banking community, the outcome looks likely to be somewhat different to the way in which money has been donated thus far.

An online poll by Wall Street Chatter, a website that aggregates online share chatter, conducted between December 28 and January 3 places little-known Republican candidate Ron Paul in the lead, with support from 19pc of respondents alongside fellow Republican Mitt Romney.

All that perhaps goes to show that what Wall Street wants from the 2008 presidential election race and what it eventually gets may be two very different things.