Major Wall Street firms have cut back sharply on political contributions for November's mid-term US elections and are pledging to avoid direct sponsorship of political advertising campaigns. Donations by leading Wall Street political action committees to candidates for the House of Representatives and Senate and to political parties are down as much as 40 percent in this election cycle compared with 2006 and 2008, according to the latest campaign finance reports on file with the Federal Election Commission. PACs are private groups that donate to political candidates and campaigns. Corporate PACs are largely employee-funded. The decline in Wall Street PAC spending is a testament to the travails that have swept the Street since the 2008 financial meltdown, from the mass layoffs that thinned its pinstriped ranks to the bonus scandals and fraud allegations that blackened its image among US voters. “If Wall Street's not quite Public Enemy No. 1, it's certainly on the list,” said Larry Sabato, director of the University of Virginia Center for Politics. “Its money is poisonous,” said a financial lobbyist involved in political contributions. FEC reports show five top Wall Street institutions – Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and Wells Fargo – spending a total of $2.1 million from the start of the 2010 election cycle on Jan. 1, 2009, through June 30, 2010. That is down 25 percent from the $2.8 million they spent in the same period during the 2006 cycle and down 40 percent from the $3.5 million they spent in the 2008 cycle, when donations surged with the White House battle between Democrat Barack Obama and Republican John McCain. Spending by a sixth firm, JPMorgan Chase, fell 61 percent from 2008 to 2010. The JPMorgan PAC was inactive in 2006. Financial executives and analysts say the decline is rooted in layoffs that have eliminated about 40,000 New York financial service industry jobs since the beginning of 2008. The bulk of PAC funding comes from employee contributions, which have fallen along with payrolls at some firms. At Morgan Stanley, which has shed 8,600 jobs, PAC receipts in the 2010 cycle are down 30 percent from 2006, while PAC donations have dropped a steeper 54 percent. Wall Street firms also avoided making PAC donations – and lawmakers avoided accepting them – during the federal bailout of the financial industry in 2008-2009. Bruising rhetoric in the financial reform debate intensified that chill in donations. The banking industry is also having trouble finding recipients for its largess, particularly in competitive races where voter anger has turned bank contributions into fuel for negative ads. Democrats and Republicans from the House and Senate failed to cash $16,500 in Goldman Sachs donations after the Securities and Exchange Commission charged the firm with civil fraud in April. “There just aren't a lot of politicians who want to hand their opponent a ‘2 X 4' to beat them over the head with,” Sabato said. A financial lobbyist involved in campaign donations this year estimated that about a dozen members of the Senate and House continue to avoid financial ties with Wall Street. All 435 seats in the House of Representatives and 37 of the Senate's 100 seats are up for grabs in November. Democrats also fear the effects of a January Supreme Court ruling that lifted long-standing campaign finance limits. President Barack Obama and other Democrats have warned that the ruling will unleash a flood of campaign advertising money from the traditionally pro-Republican business community. But major Wall Street firms, which shifted PAC contributions to Republicans during the financial reform debate in Congress, are pledging not to take advantage of the ruling. This week, Goldman Sachs, Bank of America, Citigroup and Wells Fargo all said they would not spend corporate money directly on political ad campaigns. JPMorgan Chase and Morgan Stanley declined to comment for this article. Critics say PAC data do not show the full picture of the Wall Street influence in Washington. PAC contributions are a tiny fraction of what Wall Street spent lobbying against financial reform. The securities and investment industry alone has given more than $150 million to 833 lobbyists since Obama took office in 2009, according to the Center for Responsive Politics. The broader financial sector, which includes banks, insurance, mortgage brokers, credit companies and credit unions, has spent upward of $620 million on lobbying. The Washington climate for Wall Street contributions could warm as the election nears. Some experts say a resurgence in Wall Street spending has already begun among hedge funds and private equity firms. “At this point, with financial reform passed, it strikes me that the politicians need the money more than the financial folks need the politicians,” said Greenwood Capital Associates portfolio manager Walter Todd.
