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Clinton, Obama Are Wall Street Darlings
By Janet Hook and Dan Morain
The Los Angeles Times
Friday 21 March 2008
Donations to Democratic campaigns prompt
concern that the candidates will go soft on regulation of the financial markets.
Washington - Hillary Rodham Clinton and Barack Obama, who are running
for president as economic populists, are benefiting handsomely from Wall Street
donations, easily surpassing Republican John McCain in campaign contributions
from the troubled financial services sector.
It is part of a broader fundraising shift toward Democrats, compared to past
campaigns when Republicans were the favorites of Wall Street.
Some Democrats worry that the influx of money will make their candidates less
willing to call for increased regulation of financial markets, which have been
in turmoil after a wave of foreclosures on sub-prime mortgages.
These concerned Democrats argue that their candidates, and presumptive Republican
nominee McCain, should be willing to push for financial institutions to accept
more government regulation - in exchange for likely future bailouts, such as
the recent deal the Federal Reserve orchestrated for JPMorgan Chase & Co.
to take over Bear Stearns Cos.
"I want to hear Clinton, Obama and McCain talk about a quid pro quo,"
said Jared Bernstein, an economist with the Democratic-leaning Economic Policy
Institute. "If we don't hear it, especially from Democrats, it makes sense
to ask why not and ask if they are inappropriately cozy with the financial services
industry."
The flow of campaign cash is a measure of how open-fisted banks and other financial
institutions have been to politicians of both parties. Concern is rising that
"no matter who the Democratic nominee is and who wins in November, Wall
Street will have a friend in the White House," said Massie Ritsch of the
nonprofit Center for Responsive Politics, which tracks campaign donations. "The
door will be open to these big banks."
Sen. McCain of Arizona got off to a slow start in presidential campaign fundraising.
Having clinched the Republican nomination, he could gain momentum in attracting
Wall Street money.
For now, though, Sen. Clinton of New York is leading the way, bringing in at
least $6.29 million from the securities and investment industry, compared with
$6.03 million for Sen. Obama of Illinois and $2.59 million for McCain, according
to the Center for Responsive Politics. Those figures include donations from
the investment companies' employees and political action committees.
In 2000, by comparison, Republican George W. Bush went on to win the White
House after collecting nearly $4 million from the industry versus Democrat Al
Gore's $1.4 million. In 2004, Bush received $8.8 million, twice what Democratic
Sen. John Kerry collected.
Spokesmen for Obama, Clinton and McCain deny that the candidates' ideas on
handling the economic crisis are being shaped by donations from Wall Street.
The candidates' receipts reflect a broader trend that demonstrates how money
follows power in Washington. It suggests that the nation's money managers are
betting heavily that either Clinton or Obama will capture the White House and
that Democrats will retain control of Congress.
Lenders active in the sub-prime business, such as Ameriquest and Countrywide,
were major political players in years past. But in the 2008 campaign, they are
bit players, giving perhaps $120,000 to all presidential candidates.
The troubles in the financial markets, however, have spread from sub-prime
lenders to some of the nation's largest banking corporations and investment
houses that traded in the mortgages, as Bear Stearns' failure demonstrated.
And PACs and employees of many of those businesses - including Bear Stearns
and its prospective new owner, JPMorgan - have donated heavily to campaigns.
Citigroup, the nation's largest banking company, also was among those enmeshed
in the sub-prime mortgage debacle, leading to billions of dollars in losses
last year and the resignation of its chief executive, Charles Prince.
Merrill Lynch too had multibillion-dollar losses last year, mostly involving
soured mortgage-related investments. Merrill Chief Executive Stanley O'Neal,
an Obama donor, also was forced out last year.
Overall, Citigroup and Merrill employees have given $519,000 to Clinton, $386,200
to McCain and $354,000 to Obama since January 2007.
Clinton is a top beneficiary of large Wall Street firms in part because she
represents New York. And Clinton's ties to the financial services industry extend
beyond donations: A senior economic advisor to her campaign is Robert Rubin,
Treasury secretary during her husband's administration and now a top official
at Citigroup. The consulting firm of Mark Penn, her chief campaign strategist,
worked for Calabasas-based Countrywide.
Also, Bill Clinton's administration oversaw significant changes sought by Wall
Streeters, including the repeal of the Glass-Steagall Act to allow commercial
and investment banks to consolidate.
Hillary Clinton's position on bankruptcy code overhaul - among the most important
pieces of financial legislation passed by Congress over the last decade - has
been difficult to decipher.
As first lady, she encouraged her husband to veto a bill strongly supported
by the credit card industry and opposed by consumer advocates to make it harder
for people to discharge their debts by declaring bankruptcy.
Later, as a senator, she voted for one version of the measure in 2001 but did
not vote on the bill that became law in 2005. (Her campaign said she did not
participate because her husband had just undergone heart surgery.)
As a presidential candidate, Clinton has confronted financiers on the home
mortgage crisis. "Wall Street helped create the foreclosure crisis, and
Wall Street needs to help solve it," she said.
She has advocated a 90-day moratorium on foreclosures, a five-year rate freeze
on sub-prime adjustable-rate mortgages, and aid to states to avert foreclosures.
Obama voted against the 2005 bankruptcy bill. As an Illinois state senator
in 2003, he carried a bill eventually signed into law that provided limited
protection for borrowers against so-called predatory lending practices.
In a statement, the Obama campaign said the candidate had sought to reduce
"the influence of special interests over the legislative process."
As a presidential candidate, the statement notes, Obama does not take donations
from political action committees. He did, however, accept PAC money from Citigroup
and others for his past campaigns.
"In front of audiences on Wall Street and Main Street, Sen. Obama has
proposed an aggressive plan to mitigate the sub-prime mortgage crisis both to
protect homeowners and to prevent the problems in the housing market from taking
a toll on the economy as a whole," the statement says.
Obama and Clinton have been talking for some time about addressing the mortgage
crisis. But some Democrats complain that they have been too timid in speaking
out about what they see as the Bush administration's unwillingness to help homeowners
even as the Federal Reserve moves to help major financial institutions.
"What that Wall Street money means is that few people in Washington, including
the leading presidential candidates, say a thing when the government moves to
bail out Wall Street before it helps homeowners," said David Sirota, a
liberal activist and former congressional aide.
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janet.hook@latimes.com
dan.morain@latimes.com
Times researcher Maloy Moore contributed to this report.
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