Government shutdown: Wall Street angry at tea party it has no influence over
By: MJ Lee
October 2, 2013 02:59 PM EDT
Wall Street is clear about who’s to blame for the government shutdown and a looming debt default: tea party Republicans.
What’s less clear is what Wall Street can do about it.
The reality is that deep-pocketed financial services executives and their lobbyists have little leverage against tea party lawmakers who don’t much care for financiers or big banks and don’t rely heavily on the industry for campaign cash.
“Those are the ones who are most problematic for Boehner,” one D.C.-based lobbyist who represents financial services clients said of tea party lawmakers. “I don’t think there’s any way for Wall Street to punish the 25 to 50 hard core House Republicans. It’s not like [Reps. Steve] Stockman and Tim Huelskamp are doing a lot of Goldman Sachs events. I don’t think Justin Amash cares if Bank of America gives to him or not.”
The rise of tea party lawmakers’ influence is shift from years past when the Republican party was more business friendly and could be counted on by Wall Street to give great weight to its concerns.
For many members of Congress, wooing wealthy Wall Street donors and financial services PACs is a routine part of their reelection efforts and a source of frustration for industry critics who view this largesse as standing in the way of reforms. The reputation of the banking industry has taken a beating since the financial crisis, but it nevertheless remains a powerful lobbying force in Washington thanks in part to its generous political donations.
But the industry feels powerless when it comes to dealing with some members of the tea party, who are immune from one of Wall Street’s most potent tools: campaign donations.
“The extreme radicals are going to get reelected because they come from districts where they don’t need to raise that much money,” said Greg Valliere, chief political strategist of the Potomac Research Group. “This new tea party movement is not particularly pro-business. They certainly are not pro-Wall Street and pro-big banks. That is a new strain in the Republican party that worries many on Wall Street.”
The heads of big banks — including Goldman Sachs CEO Lloyd Blankfein and JPMorgan Chase CEO Jamie Dimon — met with President Barack Obama on Wednesday to discuss the shutdown, debt ceiling and other issues. They are also expected to meet with some lawmakers as part of gatherings organized by the Financial Services Forum — a group that represents the heads of large banks and insurance companies.
But the Wall Street chiefs’ day trip to Washington isn’t expected to budge negotiations over the fiscal stalemates.
Wall Street’s frustration over the current fiscal impasse is shared by the larger business community, which has tried through groups like the Chamber of Commerce to convince lawmakers that the threat of shutting down the government or failing to raise the borrowing limit should not be used as negotiating ploys.
Defenders of the tea party movement say a reliance on Wall Street’s deep pockets for campaign funding is precisely what the new wave of conservative politicians are trying to buck.
Daniel Horowitz, a conservative activist and strategist for the Madison Project — a group backing primary challenges to GOP senators including Senate Minority Leader Mitch McConnell (R-Ky.) — said tea party candidates made an “inviolable promise” to constituents not to allow entitlements to take root. The establishment has only limited options for pressuring them financially, and that’s the whole point, he said.
“They have no allegiance to K Street and Wall Street. They were elected by passionate heartland conservatives of modest means,” Horowitz said. “While money is still important, the advent of social media has allowed these people to connect directly with their constituents and largely bypass the old power brokers.”
Recent fundraising numbers for tea party favorites in the House like Huelskamp and Amash show how little they count on Wall Street to fill their campaign coffers.
Huelskamp, a Kansas Republican first elected to Congress in 2010, received $8,000 from finance, securities and investment PACs in the 2012 cycle, according to the Center for Responsive Politics. Amash of Michigan’s 3rd Congressional District — another member of the tea party elected as a part of the 2010 GOP wave who has openly criticized Republican leadership — collected just $3,000 last cycle from securities and investment PACs.
This is in stark contrast to someone like Peter King (R-N.Y.), who hails from a more moderate district with close proximity to Wall Street. The New York congressman received $45,500 from finance, securities and investment PACs during the 2012 cycle, according to the Center for Responsive Politics, including $10,000 from the Goldman Sachs PAC.
King, who has been urging his party to drop the fight against Obamacare and pass a bill to fund the government, told POLITICO that if his Republicans colleagues continue to tie Obamacare measures to a continuing resolution, this could “hurt” the GOP’s ability to “raise money from Wall Street and the business community” in the future.
“This threat of government shutdown and not paying debt and defaulting, it’s going to have a real impact first of all economically, and it’s going to have a follow-up effect of Wall Street wondering why they support Republicans,” King said.
As the government shutdown continued into Wednesday, market analysts warned that concerns about a debt default — initially dismissed by Wall Street as improbable, if not unimaginable — were beginning to intensify.
Economists warn that the effects of a U.S. default would be much worse than a government shutdown because the it would call into question the creditworthiness of the United States. If Congresses misses the Oct. 17 deadline to raise the country’s borrowing cap because of congressional efforts to weaken Obamacare, markets would immediately blame the entire Republican Party, analysts warned.
“They let Obamacare pass. Now they’re trying to defund it. … It’s completely incompetent and childish,” said Michael Obuchowski, a portfolio manager with North Shore Asset Management. “They should focus on really important hings: how to help the economy move forward, how to help businesses grow.”
Still, financial services lobbyists said that as much as the industry is fed up with tea party lawmakers’ role in Washington’s fiscal showdowns, these members remain largely out of their reach.
“Quite frankly, a lot of the tea party members are not all that dependent on lobbyists and K street anyway,” said one financial services lobbyist based in Washington. “We probably overemphasize the importance of lobbying and PAC money to that subset.”