A lot of questions I’ve gotten of late about the presidential election are premised on a false assumption: financial firms are Republican and the shift at the top of the Democratic ticket and better electoral odds has thus sent a shiver down many well-tailored spines. But, major financial companies are for the most part brutally pragmatic about pretty much everything and this applies with particular force when it comes to playing politics in a tightly-fought election. This year’s presidential politics are more than lively, but it’s still absolutely no different when it comes to big financial companies and the sides they take. Here’s why.
First, let me make clear which big financial companies I’m talking about. Hedge funds and some private-equity companies are branded as much by their leaders as by what they actually return to investors. The higher the profile of the manager, the bigger the impact they imply they make on Wall Street and the bigger the implied impact they make on national policies, the bigger a role some investors think these leaders play on the Street. This is an image-dependent financial-market and political feedback loop, and it often works astonishingly well. Playing big in politics or, at least, giving more or less big in highly-publicized ways burnishes a “big foot” image and, even when some investors disagree, they often stay put – see Bill Ackman.
Big financial companies answerable to powerful regulators and diverse shareholders cannot afford big political profiles on candidates or hot-button issues. When CEOs think this rule doesn’t apply to them, they often learn the hard way that it does – see Larry Fink.
That said, big-company CEOs can and often do have big policy footprints – see here Jamie Dimon. However, high-profile positions are often on priority issues that cut across party lines such as the need to reduce the fiscal deficit. After George Floyd, big financial companies made many racial-equity promises most have quietly rolled back as anti-DEI pressure grew. The same holds true for those who said they wouldn’t provide any political support for Donald Trump after January 6. As his political prospects brightened, their political activities went back to pragmatism.
This isn’t to say that big financial companies are political stick-in-the muds. Quite the contrary. Financial services is of course a business in which policy makes a major difference to the bottom line and policy is more often than not decided by personnel appointed at least in part for political purposes. Massive advocacy operations at most major financial institutions mobilized on topics that strike the bottom line are irrefutable evidence that big financial companies know this well. It’s also clear in the way they play elections for key political offices.
Virtually every major financial-services company has a senior officer on each side of each vital election. This isn’t new. When I worked for Bank of America in the 1980s, we had a Republican CEO and a Democratic chairman of the board. Each worked for the politicians he genuinely liked, giving verisimilitude to their political advocacy and keeping their consciences clear. And, we always had a nice inside track with whoever won.
And so it is to this day. See for example Blackstone. Its head, Steve Schwartzman, is a prominent Republican who strongly supported Donald Trump in 2016 and became still more influential thereby. But the firm’s number two, Jonathan Gray, is a very active Democrat, one who ensured his firm’s influence continued, albeit with less fanfare, during the Biden years. So it will be again when it comes to 2024. Even firms – see again JPMorgan – where the CEO stands above the fray have top officers at every major fundraiser and each “policy forum” for both campaigns.
The pragmatism of these political strategies is born not only out of prudence for the company’s bottom line, but also the discipline shareholders and exercise even if politicians don’t take a particularly partisan CEO to task. Major shareholders, most institutional investors, and even large counterparties are skilled geopolitical-risk analysts. If they think a firm in which they invest or to which they are at risk could be damaged by a major election’s outcome, then they turn skittish. There is no big financial company that relies on wholesale and capital markets which can afford worried outsiders. Retail franchises such as hedge funds trying to attract well-heeled individuals can take a high-profile stand that makes like-minded people like them even better. Big financial companies with massive infrastructures and dominant roles across the globe, not so much.