WASHINGTON -- With their first act in full control of the new Congress, Republicans tried to push through a bill to delay the Volcker Rule, which limits risky trades by banks. The plan failed as Democrats rallied a majority of their caucus to oppose the measure.
Just weeks earlier, Republicans had placed a rider granting taxpayer support to other risky financial trades into a comprehensive budget bill. That measure passed, but not before bruising last-minute opposition from Democrats, including Sen. Elizabeth Warren (Mass.) and House Minority Leader Nancy Pelosi (Calif.).
These anti-Wall Street stands came amidst an internal Democratic debate, described by some as a fight for “the party’s soul.”
They also occurred after one of the biggest shifts of campaign money away from the Democratic Party in recent history. Since President Barack Obama’s election, no industry has moved away from funding Democrats more dramatically than the finance, insurance and real estate sector and its key constituents.
Of course, the flight of financial sector money is not the sole reason for the increasingly populist arguments from Democratic politicians. But it has helped the debate to move, ever so slightly, away from Wall Street support.
In the last two elections, according to data from the Center for Responsive Politics, Democratic Party committees and candidates saw their share of contributions from finance, insurance and real estate donors shrink to the lowest percentages since at least 1990. Democrats received only 32 percent (versus 68 percent for Republicans) in 2012 and just 38 percent (versus 62 percent for Republicans) in 2014.
Percentage of Finance, Insurance and Real Estate Campaign Contributions By Party (1990-2014)
Source: Center for Responsive Politics
The figures, when adjusted to 2013 dollars, also showed significant declines in the sheer amount of money raised from the financial sector by Democrats. The party's $122 million haul in 2014 was its lowest total from the financial sector in a midterm election since 1998. The $170 million for 2012 was the lowest total for Democrats in a presidential election year since 1996.
Meanwhile, Republicans have never raised so much from the financial sector. The party pulled in a midterm record of $199 million in 2014 and a presidential cycle record of $356 million in 2012. That latter total was no doubt boosted by the presence of private equity multimillionaire Mitt Romney as the party’s standard-bearer.
This dramatic shift in financial resources is of major importance because the financial industry remains not only the largest sector of the economy -- thanks to decisions made by policymakers in Washington -- but also the largest source of campaign funds for federal elections. According to the Center for Responsive Politics, the sector has made contributions of $3.8 billion (including donations to super PACs) since 1990 -- $1.4 billion more than the next tracked sector. In any given year, the financial sector accounts for approximately 10 percent of all campaign donations.
In decades past, other industries have shifted their support from one party to another in dramatic fashion, as detailed by political scientist Thomas Ferguson. These shifts often took place alongside major changes in party composition, attitude and policy priorities. For example, the flight of oil and gas companies from the Democratic Party in the 1970s, amid more environmental and consumer regulation and debate over government oil price controls, helped move the country’s politics in favor of pro-business Republicans by the end of the decade.
The recent move of financial sector money away from Democrats has been driven by the passage of the Dodd-Frank Wall Street reforms in 2010, proposals to increase capital gains tax rates and the embrace of Occupy Wall Street by some Democrats. Big bankers have also reacted -- perhaps overreacted -- to the way they were discussed in Washington after they helped melt down the global economy.
Numerous stories have been written about Wall Street's hurt feelings after Obama said, “I did not run for office to be helping out a bunch of fat cat bankers on Wall Street.” While not nearly as pointed as Franklin Roosevelt's attack on “economic royalists” during his 1936 re-election campaign, Obama’s statement turned off the financial sector. (This despite the many Wall Street allies, including Larry Summers and Tim Geithner, in his administration.)
Overwrought responses compared critiques of the wealthy in general to Nazism. Private equity billionaire Stephen Schwarzman complained that the idea of hiking capital gains taxes was like a war, "like when Hitler invaded Poland in 1939." Venture capitalist Tom Perkins, who flipped from funding Obama in 2008 to Romney in 2012, wrote to The Wall Street Journal that the Occupy movement presaged a “Kristallnacht” for the wealthy 1 percent. Home Depot co-founder and private equity investor Ken Langone compared the populist rhetoric employed by Bill de Blasio in his successful New York mayoral race to "what Hitler was saying in Germany."
Former Rep. Barney Frank (D-Mass.) told HuffPost in 2014 that Wall Street’s move away from the Democratic Party can be attributed in part to a loss of "psychic income."
"I don't think that the [Dodd-Frank] legislation really hurt them much, and I think a lot of them, frankly, some of them welcome it because they're not under competitive pressure to do stupid things -- now, nobody can do them," Frank said. "But we really hurt their feelings mightily, particularly the president. You've seen that with these ridiculous statements from Steve Schwarzman going on about Nazis."
This flight of financial sector capital away from the Democrats could ultimately prove to be just a temporary reaction to the post-meltdown moment. Hillary Clinton, an almost-assured candidate for the 2016 presidential nomination, is a favorite of Wall Street donors.
In a Salon article prior to the 2012 election, however, New America Foundation scholar Michael Lind expressed doubts that Wall Street would ever return to the Democratic Party fold.
"In the aftermath of the Great Recession, moderate as well as progressive Democrats are going to emphasize deficit reduction through tax increases far more than even moderate Republicans. The easiest way to raise lots of revenue is to raise today’s low rates on capital gains, perhaps even making the capital gains and income tax rates equal. Any such reform will cut deeply into the incomes of many Wall Street rentiers whose 'progressivism' extends only to cost-free support for gay rights and abortion rights," Lind wrote.
Changes occurring within the Democratic Party’s upper ranks are further likely to keep financial sector donors firmly planted on the Republican side.
Since the loss of the Senate majority in November, Warren, the party’s chief bank critic, has been elevated to a leadership position. Sen. Sherrod Brown (D-Ohio), another financial industry critic who was fiercely opposed by the industry in his 2012 re-election campaign, is now the top Democrat on the Senate Banking Committee. Socialist Sen. Bernie Sanders (I-Vt.), who caucuses with Democrats, is the top member of that caucus on the Senate Budget Committee. Meanwhile, Rep. Maxine Waters (D-Calif.), yet another Wall Street critic, took the top Democratic spot on the House Financial Services Committee.
These lawmakers' roles and the actions they take in the next two years may say more about the future of Wall Street support for Democrats than anything a Clinton candidacy can do.
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