Wall St needs to rebuild ties with Obama
Wall Street firms gambled on Mitt Romney and lost. Now, faced with the prospect of even tougher regulations in President Barack Obama's second term, they have to build better ties with the new financial regulators he will appoint.
Stock investors fear banks will meet with limited success. Shares of Goldman Sachs Group, JPMorgan Chase & Co and Citigroup dropped 5 per cent, Bank of America lost 6 per cent and Morgan Stanley fell 7 per cent in midday trading today.
Mr Obama lost the support of many bankers in the aftermath of the 2008 financial crisis and the passage of the 2010 Dodd-Frank financial reform law, which sought to shore up the financial system but also cost banks billions of dollars in annual profit.
The Democratic president has openly stated his distaste for "fat cat bankers" who "don't get it," and bankers fear more trouble is ahead if they cannot influence how the Dodd-Frank rules are implemented.
"He will continue to increase regulation, demonize and vilify businesses, and spend a lot of money, and tax people, and so forth," said Dick Kovacevich, a former Wells Fargo & Co CEO and supporter of Republican challenger Romney.
Wall Street does have some ways to push back. Banks can sue to try to block provisions of Dodd-Frank that they object to, a tactic that has already met with some success. The financial industry can also press regulators to write rules that soften some reform laws.
And banks can roll up their sleeves and turn on the charm, which can help, industry lobbyists said.
"We're going to have to do a lot of heavy lifting over the next four years. But it's not an impossible task," said Frank Keating, chief executive of the American Bankers Association.
But given that Mr Obama won and that financial reform is popular among Americans, many on Wall Street acknowledge that there's only so much they can do.
"Obama will be less likely to hold back on regulation this term," said Chris Tobe, who advises pension plans as a principal at Stable Value Consultants and is a trustee of the Kentucky state pension fund. The industry's support for Mr Romney does not help, he added.
People working in the U.S. securities and investment industry gave $20 million to Romney's campaign, versus $6 million to Obama, according to the Center for Responsive Politics. Four years ago, Obama received $16 million and Republican nominee John McCain only attracted $9 million.
Wall Street was so confident in Mr Romney's chances that the Financial Services Roundtable, a leading industry group in Washington, recently named as its head Tim Pawlenty, a Romney campaign co-manager who has little financial firm experience and few ties to Washington policymakers.
Representative Barney Frank, a Democrat and the co-author of Dodd-Frank, said picking Mr Pawlenty, a partisan Republican, was a "terrible mistake."
The industry's best hope now may be to work with regulators, since legislative changes are unlikely, Mr Frank said.