Wall Street's Superficial Politics

It seems that Wall Street, which was broadly supportive of President Obama and the Democrats in 2008, is having voter's remorse. That's the subject of Andrew Ross Sorkin's column today that chronicles some major figures in finance who gave generously to Democrats, but now appear to be turning to Republicans. But unlike the popular narrative that it's all about regulation and taxes, Sorkin says something else is to blame: ego.

He explains that some of the tactics taken by the Obama administration like championing the Volcker Rule have made bankers feel like it's personal. He explains that this isn't what Wall Street expected:

Mr. Obama was viewed as a member of the elite, an Ivy League graduate (Columbia, class of '83, the same as Mr. Loeb), president of The Harvard Law Review -- he was supposed to be just like them. President Obama was the "intelligent" choice, the same way they felt about themselves. They say that they knew he would seek higher taxes and tighter regulation; that was O.K. What they say they did not realize was that they were going to be painted as villains.

Remember what their choice was back in 2008? Was there really any doubt that Wall Street -- a group of people who generally went to good schools and consider themselves to be very smart -- would better relate to Ivy-educated former Chicago lawyer President Obama or Naval Academy war hero Arizonan Senator McCain? There's no mystery here. But I'd take this analysis one step further: Wall Street was, and had long been, politically superficial.

If Sorkin is right, and based on my interaction with those who work on Wall Street I believe he is, then these bankers and traders didn't really choose President Obama because they liked his politics. They chose him because they liked his background. That isn't much better than if someone voted for one candidate over the other because he was better looking. They're choosing a candidate based on who he is rather than his politics.

In fact, most of those who I know on Wall Street aren't particularly politically principled. They basically have the view that the government can do its thing, and they can do theirs. More regulation? They'll just shrug and find loopholes or new ways to make money. Higher taxes? They have accountants with sophisticated income recognition strategies that handle that sort of nuisance. Their involvement in politics essentially consists of donating money to important politicians so that they can be relatively sure that government will generally leave them alone, or lend them a helping hand in case of emergency.

And that's what they expected from President Obama. Instead, he adopted the popular narrative that Wall Street was the villain. This was a shock, because these bankers don't share that view. As far as they're concerned, a very small portion of them actually were responsible for the problems that led to the financial crisis. Indeed, many of them suffered disproportionally, as they had a year or two where their bonuses were far below what was anticipated, even though their individual performance hadn't declined. They felt that they were in many ways victims of the housing bubble as well, even if their consequence wasn't foreclosure or long-term unemployment like so many Americans.

That's not to say people -- or even President Obama -- should necessarily by sympathetic to their bruised egos. This is just the explanation. If these Wall Street bankers and traders had analyzed President Obama and his base's politics on a deeper level, then they would have seen precisely the treatment they got. Frankly, it could have been worse if the far-left progressive wing got their way. Of course he would vilify Wall Street after a credit crunch nearly caused another depression. After all, politicians need someone to blame in such situations. What other outcome could they have reasonably expected?