In what is widely being reported as the most expensive election in U.S. history, with a total of $6 billion being spent over the campaign, Wall Street is among the biggest losers when the election results were announced on November 6th. After widely endorsing Barack Obama in the 2008 Presidential election, the industry turned to support one of its own, former Bain Capital partner Mitt Romney. After heaping nearly $61 million on Romney’s campaign (the financial services industry donated only $18.7 million to Barack Obama according to Forbes), Wall Street firms donated an additional $94 million to Super Political Action Campaigns (PACs), mostly aligned with Romney.
Employees of Goldman Sachs were among the most generous, donating $900,000 to Romney’s campaign and just $136,000 to Obama. This is perhaps one of the most surprising examples as Goldman had been a traditional supporter of Democrat candidates. Whether investment bankers were concerned about Obama’s policies or wanted to support someone from the Street, their money certainly was behind the Republican candidate.
Wall Street’s Partisanship Was No Surprise in this Election
There should be no real surprise to the partisanship seen on Wall Street during this past election. While the merits of Obama’s actions can certainly be debated politically, there is no doubt that regulation and oversight has dramatically increased on Wall Street since the financial crisis. Many investment bankers viewed Romney as someone with direct experience in the financial industry, and would know what regulations are appropriate and what regulations would simply be an obstruction to investment managers. Whether a Romney administration would have actually meant significantly less regulation is unclear, but the perception on Wall Street can certainly be measured by campaign contributions.
Dodd-Frank was Major Concern of Investment Bankers
One of the key issues facing investment bankers was the imposition of the Dodd-Frank financial reform law. The Act created a number of new federal agencies and related regulations designed to promote financial institution transparency while increasing oversight of systemic risk and speculative trading by financial institutions.
Mitt Romney had proposed to repeal Dodd-Frank, which would have been a welcome gift to investment bankers. However, he did also indicate that he anticipated a role for some greater federal oversight of financial institutions. But how different Romney’s plan was from Dodd-Frank, we’ll never know.
What Do the Election Results Mean for Investment Banking Job Seekers?
The reality is that most of the opportunities in the investment banking sector come from the underlying strength of the global economy. Whether Romney or Obama would have sparked more economic growth in the United States with their respective policies is a matter of political debate. At the margins, relaxing regulations such as Dodd-Frank would like be of some benefit to investment banks and therefore current and prospective employees.
But as the world’s economy becomes more globalized, the role that America alone plays in determining the strength of the investment banking sector has declined somewhat. Trouble in European economies has forced institutions such as UBS to lay off thousands. With the amount of labor mobility these days, those former UBS employees will be competing for American (as well as European and Asian) investment banking jobs. Those seeking employment in the investment banking space should be equally interested in the geopolitical situations in Europe and Asia as they are in the selection of a American President between two relatively competent men.