Fat Cats Whupped (for Now)

Eduardo Porter, on election day, wrote an interesting column in the NY Times, gathering recent data suggesting that Fat Cat donors, and the corporations, don’t get very much for their dollars:

 Corporate watchdogs suggest another cause for concern: campaign contributions driven by corporate executives might harm the long-term interests of their shareholders.

A study published last summer by scholars at Rice University and Long Island University looked at nearly 1,000 firms in the Standard & Poor’s 1,500-stock composite index between 1998 and 2008 and found that most companies that spent on politics — including lobbying and campaign donations — had lower stock market returns.

Another study published this year by economists at the University of Minnesota and the University of Kansas found that companies that contributed to political action committees and other outside political groups between 1991 and 2004 grew more slowly than other firms. These companies invested less and spent less on research and development.

Notably, the study determined that corporate donations to the winners in presidential or Congressional races did not lead to better stock performance over the long term. Indeed, the shares of companies that engaged in political spending underperformed those of companies that did not contribute.

And the relationship between politics and poor performance seems to go both ways: underperforming companies spend more on politics, but spending on politics may also lead companies to underperform.

Which reminds me of the Big Business mantra, conducted by the conservative media, that union members should not have their dues used for political purposes without their express consent.  And shareholders!? I immediately think. The money corporations spend on political causes, not to mention corporate jets, lavish lifestyles and shady business might otherwise go into shareholder returns.

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Today’s Times takes a look at the bad bet made by Wall Street:

Few industries have made such a one-sided bet as Wall Street did in opposing President Obama and supporting his Republican rival. The top five sources of contributions to Mr. Romney, a former top private equity executive, were big banks like Goldman Sachs and JPMorgan Chase, according to the Center for Responsive Politics. Wealthy financiers — led by hedge fund investors — were the biggest group of givers to the main “super PAC” backing Mr. Romney, providing almost $33 million, and gave generously to outside groups in races around the country.

…Wall Street, however, now has to come to terms with an administration it has vilified. What Washington does next will be critically important for the industry, as regulatory agencies work to put their final stamp on financial regulations and as tax increases and spending cuts are set to take effect in the new year unless a deal to avert them is reached. To not have a friend in the White House at this time is one thing, but to have an enemy is quite another.

“Wall Street is now going to have to figure out how to make this relationship work,” said Glenn Schorr, an analyst who follows the big banks for the investment bank Nomura. “It’s not impossible, but it’s not the starting point they had hoped for.”
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And of course, they have to start scrambling to implement plan B:

Wall Street is now pivoting from a broad attack on Dodd-Frank to a more targeted approach to its most contentious rules. A central goal, lobbyists say, is to tame unfinished rules that rein in derivatives trading.

“We urge the president to carefully consider the closeness of the election results as he evaluates his regulatory policy priorities for a second term,” Dale Brown, chief executive of the Financial Services Institute, said in a statement on Tuesday night as election returns piled in.

Lobbyists are appealing to more sympathetic members of Congress, urging them to apply pressure on the Commodity Futures Trading Commission, which has proved to be an aggressive foe of the banks. Financial trade groups are also expected to line up behind a new bill in Congress that would undercut the authority of agencies like the trading commission and the Federal Deposit Insurance Corporation. The bill, which a Senate committee is expected to vote on this month, would subject independent regulators to heightened rule-writing standards.

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