What Party Panders to the Rich? Libertarians Take Note:

[RMNIXON]

Saturday, March 22, 2008

Wall Street's donations favor the Democrats

The question that needs to be asked, critics say, is whether the favor will be returned


LOS ANGELES TIMES


Hillary Rodham Clinton and Barack Obama, who have run 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 fund-raising shift toward Democrats, compared with past campaigns when Republicans were the favorites of Wall Street. But some Democrats worry that the influx of money will make their candidates less willing to call for reforms to increase regulation of financial markets, which have been in turmoil because of a wave of foreclosures on subprime mortgages. These concerned Democrats say that their candidates, and McCain, should be willing to push hard 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.

“I want to hear Clinton, Obama and McCain talk about a quid pro quo,” says 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 being raised 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.”

McCain got off to a slow start in fundraising. Having clinched the Republican nomination, he could gain momentum in attracting Wall Street money.

For now, though, Clinton is leading the way, bringing in at least $6.3 million from the securities and investment industry, compared with $6.03 million for Obama and $2.6 million for McCain, according to the Center for Responsive Politics. Those figures include donations from the investment companies’ employees and political-action committees.

By comparison, in 2000 Republican George W. Bush went on to win the White House after collecting nearly $4 million from the industry, compared with Democrat Al Gore’s $1.4 million. In 2004, Bush received $8.8 million, twice what Sen. John Kerry collected.

Democrats running for Congress, too, have increasingly benefited from Wall Street money.

Spokesmen for Obama and Clinton deny that their ideas on handling the economic crisis are being shaped by the donations they have accepted from Wall Street. McCain aides did not respond to inquiries about the issue.

But 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 that either Clinton or Obama will capture the White House and that the Democrats will retain control of Congress.

In part because she represents New York, Clinton is a top beneficiary of large Wall Street firms.

Her ties to the financial-services industry extend beyond donations: A senior economic adviser to her campaign is Robert Rubin, her husband’s Treasury secretary who is now a top official at Citigroup.

Hillary Clinton’s position on bankruptcy-code reform - one of the most important financial matters on which Congress passed legislation over the past 10 years - 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 bill in 2001 but did not vote on a bill that became law in 2005.

As a presidential candidate, Clinton has confronted financiers on the home-mortgage crisis.

Obama voted against the 2005 bankruptcy bill. As an Illinois state senator in 2003, Obama carried a bill eventually signed into law that provided limited protection for borrowers against so-called predatory lending.


Winston-Salem Journal | Wall Street's donations favor the Democrats

__________________________________________________


I just want to be sure who you are voting for next time you hear Obama or Clinton talk about the factory workers, and the poor, and Tiny Tim and that crutch he carries when Daddy brings him home. How they are the real agents of change and all that......

[Galactic Gigolo]

You're forgetting that John McCain has raised a total $64 million while Obama has raised $193 and Clinton $169, so even if you're talking about an industry traditionally thought to ally themselves with Republicans, it'd be expected that in this particular race the Democrat would come out on top.

Not saying your point is any more or less valid, but this doesn't work.

[thewise1]

I only skimmed this, but what do libertarians have to do with this?

[WickedLou9]

It shouldn't be that suprising... but even I was suprised when I heard about this. I honestly thought that the markets would do better under the GOP.

Stock markets historically do better under Dems than Reps. - Jan. 22, 2004

NEW YORK (CNN/Money) - Plenty of Wall Streeters are Republicans. The party's policies are seen as better for big business and therefore better for the stock market.
"Democrats are seen as being pro-regulatory, and more willing to enact laws against Wall Street and laws against CEOs," said Don Luskin, chief investment officer at Trend Macrolytics.
But here's Wall Street's strange little irony -- studies show the stock market performs better and tends to be less volatile when Democrats are in power.
This discrepancy was explored recently in a study by two finance professors at the University of California at Los Angeles, Pedro Santa-Clara and Rossen Valkanov.
According to their paper, entitled, "The Presidential Puzzle: Political Cycles and the Stock Market" and published in the October issue of the Journal of Finance, stock market returns are on average about 5 percent higher when the White House is run by a Democrat than during Republican rule.
Looking at the 72-year period between 1927 and 1999, the study shows that a broad stock index, similar to the S&P 500, returned approximately 11 percent more a year on average under a Democratic president versus safer, three-month Treasurys. By comparison, the index only returned 2 percent more a year versus the T-bills when Republicans were in office.

[6SpeedTA95]

Originally Posted by WickedLou9

It shouldn't be that suprising... but even I was suprised when I heard about this. I honestly thought that the markets would do better under the GOP.

Stock markets historically do better under Dems than Reps. - Jan. 22, 2004

Thats very true, but the timing of some of the study is pretty interesting in the way it was conducted. As is the overlay of the business cycle over the course of various president's terms.

[motivez]

So should we listen to those people on wall street, Nixon?

[kinggovernor]

Originally Posted by motivez

So should we listen to those people on wall street, Nixon?

I think they are hedging their bets, hoping to buy the influence with the ones that intend to do them the most harm.

[WickedLou9]

Originally Posted by kinggovernor

I think they are hedging their bets, hoping to buy the influence with the ones that intend to do them the most harm.

Even though they have done better historically under democrats?

[kinggovernor]

Originally Posted by WickedLou9

Even though they have done better historically under democrats?

"I want to take those profits"

Is more about what I am talking about

[hsmith]

Originally Posted by kinggovernor

"I want to take those profits"

Is more about what I am talking about

Never mind it is the largest company on earth and only earning a 10% return

[WickedLou9]

Originally Posted by hsmith

Never mind it is the largest company on earth and only earning a 10% return

I assume you are talking about Exxon? It doesn't make sense to use percentages as the sole measure of profitability. The size of the company is a key factor. For a small 100 person company which is growing very quickly, 20% margins wouldn't be unheard of. Conversely, A company like Wal-mart earns only 2 or 3% and it's very successful. They are expanding and opening new stores all the time. Without factoring in the industry, the size of the company, etc, just going by profit margins is almost dishonest really. So when people say Oh Exxon made 30 billion dollars in profit last quarter, but hey it's only 10% of thier revenue so it's fine, well it just speaks to the fact that they don't know much about business.

[hsmith]

Originally Posted by WickedLou9

I assume you are talking about Exxon? It doesn't make sense to use percentages as the sole measure of profitability. The size of the company is a key factor. For a small 100 person company which is growing very quickly, 20% margins wouldn't be unheard of. Conversely, A company like Wal-mart earns only 2 or 3% and it's very successful. They are expanding and opening new stores all the time. Without factoring in the industry, the size of the company, etc, just going by profit margins is almost dishonest really. So when people say Oh Exxon made 30 billion dollars in profit last quarter, but hey it's only 10% of thier revenue so it's fine, well it just speaks to the fact that they don't know much about business.

Who said it was 10% of their revenue? They are making a 10% RETURN on their investment. Compare that to other industries and it really isn't that impressive.

The fact they are making $30,000,000,000 is impressive, but when you consider the scope of their business and what the return is when compared to other industries, they should be making more.

If you are an Exxon stock holder, you are seeing a 10% return. Good, but not "great"

The amount of money they make is irrelevant when compared to the size of the business.

[Publius]

Originally Posted by WickedLou9

I assume you are talking about Exxon? It doesn't make sense to use percentages as the sole measure of profitability. The size of the company is a key factor. For a small 100 person company which is growing very quickly, 20% margins wouldn't be unheard of. Conversely, A company like Wal-mart earns only 2 or 3% and it's very successful. They are expanding and opening new stores all the time. Without factoring in the industry, the size of the company, etc, just going by profit margins is almost dishonest really. So when people say Oh Exxon made 30 billion dollars in profit last quarter, but hey it's only 10% of thier revenue so it's fine, well it just speaks to the fact that they don't know much about business.

So a business that invests $25,000 & gets back 10% return isn't doing as well as a business that invests $300,000,000,000 and gets back a 10% return? Investors the world over would disagree with you.

[WickedLou9]

Originally Posted by Publius

So a business that invests $25,000 & gets back 10% return isn't doing as well as a business that invests $300,000,000,000 and gets back a 10% return? Investors the world over would disagree with you.

No they wouldn't actually. People don't make investing decisions on profit margin alone. If what you said was actually true, no one would buy Walmart, what with it's 3% profit margins. But they do. Why? Because: 1) walmart is huge and large companies typically have smaller margins. 2) The industry. Retail typically operates with lower margins, they make thier business on volume. 3% is a good margin for Walmart.

So Jeez I guess there is more to it than JUST profit margins. In fact I could probably show you a dozen companies all that have 10% margins, some of which are poor investments and some of which are great.

[WickedLou9]

Go look at these companies

FFG
T
CHS
EDR
ESS
PVA


Tell me which one is doing what. They all have 10% margins.

[motivez]

Originally Posted by WickedLou9

Go look at these companies

FFG
T
CHS
EDR
ESS
PVA


Tell me which one is doing what. They all have 10% margins.

Comparison, courtesy of google finance:

FFG - FBL Financial Group - Google Finance

[WickedLou9]

Originally Posted by motivez

Comparison, courtesy of google finance:

FFG - FBL Financial Group - Google Finance

That's pretty neat, I didn't know they had that feature

[motivez]

Yeah, Google Finance rocks

[WickedLou9]

Compare XOM with MSFT.

MSFT has a 30% margin. It's stock is not performing as well as XOM.