April 24 (Bloomberg) -- Democrats outdid Republicans last year in attracting political donations from investment banks, brokerages and fund managers for the first time since 1994, helped by support from hedge funds and companies such as Merrill Lynch & Co.

Democrats got $13.6 million, or 52 percent of the financial industry's $26.3 million in political donations in 2005, said the Center for Responsive Politics, a nonpartisan Washington group that researches the influence of money on elections and public policy. In the two years leading up to the 2004 presidential election, Republicans received 52 percent of the $91.6 million given by the industry.

``Wall Street wants change'' on issues such as the Iraq war and the budget deficit, said James Torrey, chairman of the Torrey Funds, which manages about $1 billion. ``I'm finding people who are registered Republicans who are saying to me, `what can I do to help?'''

The securities and investment industry is among the biggest sources of campaign cash in U.S. politics. The industry's 2004 contribution total to candidates and parties was higher than any group except lawyers, health professionals and the real estate industry, according to the center, which studied FEC records.

The Iraq war and ethics problems among congressional and executive-branch Republicans have helped drive President George W. Bush's public approval ratings to the lowest point of his presidency. That has spurred donations to Democrats, said Orin Kramer, general partner of Boston Provident Partners LP in New York and a longtime Democratic fund-raiser.

`Party With No Power'

``When the party with no power can raise more money than the party with all the power, it means people are pretty disturbed about the country's condition,'' Kramer said.

The Democrats got 51 percent of the industry's funds in 1994, the year they lost control of both houses of Congress. Republicans' share rose from then, peaking at 58 percent in 1996.

Since then, ``Republicans have become complacent,'' said Mallory Factor, a Republican activist and chairman of the Free Enterprise Fund in Washington, which advocates small government and free markets. ``They gained their ascendancy by being better on the economic issues, but now they're frozen by their desire to maintain the status quo.''

Federal Candidates

Factor raised more than $500,000 for Bush and the Republican Party for the 2004 elections. In 2005, he gave no money to federal candidates, according to Federal Election Commission records.

Another reason for the shift may be the candidates themselves. New York Senator Hillary Clinton and Connecticut Senator Joe Lieberman, both Democrats facing re-election this year, were the two most successful fund-raisers in 2005 on Wall Street, said Sheila Krumholz, acting executive director of the Center for Responsive Politics. Senator Charles Schumer, also of New York, heads the Democratic fund-raising arm in the Senate.

``The Democratic advantage is largely explained by who is running,'' Krumholz said. Clinton and Lieberman ``are continuing to be magnets for this money,'' she said.

One Clinton supporter is Morgan Stanley Chief Executive John Mack, who gave her Senate campaign $4,000 last year, his biggest donation to an individual politician, according to FEC records. In 2004, as co-chief executive of Credit Suisse Group, he raised at least $200,000 for Bush, earning him a spot in the Ranger donor club.

Santorum Donation

Mack's only other individual candidate donation last year was $1,000 to Senator Rick Santorum, a Pennsylvania Republican, according to FEC records. Jim Badenhausen, a spokesman for Morgan Stanley, declined to comment.

Merrill Lynch, the world's largest securities firm, is home to another one of Bush's 2004 Rangers, Chief Executive Stanley O'Neal. Merrill's political action committee, which pools executives' donations, is on track to give more money to Democratic candidates than to Republicans for the 2006 election for the first time in the PAC's quarter-century history, if current trends hold.

Through February, the New York-based company gave 51.5 percent of its campaign committee donations to Democrats, according to PoliticalMoneyLine, a Washington-based company that tracks money in politics. Merrill Lynch spokesman Mark Herr had no comment. Merrill Lynch is a passive minority investor in Bloomberg LP, the parent of Bloomberg News.

Hedge funds also are tilting toward Democrats, who took in 57 percent of the amount donated by the 50 largest hedge funds in 2005, according to a review by Bloomberg News. Donations from those 50 funds rose 44 percent from 2003, although at $1.66 million, the amount is still a small part of the industry total.

Goldman Sachs

Cliff Asness, a former Goldman Sachs Group Inc. executive who is president of the Greenwich, Connecticut-based hedge fund company AQR Capital Management LLC, was a supporter of Bush in 2004, giving the maximum $4,000 to his campaign. For this election, he has given $25,000 to the Democratic National Committee. Asness declined to comment.

Yet while the industry's trend is to give more to Democrats, firms such as Goldman Sachs and Morgan Stanley, the world's second- and third-biggest securities firms by market value, have boosted their giving to Republicans in the past year.

Goldman's employees and its PAC evenly split their $1.52 million in donations in 2005 between Republicans and Democrats after giving Democratic candidates nearly twice as much money for the 2004 elections, according to figures compiled by Bristow, Virginia-based Dwight Morris & Associates, which tracks political donations.

Republican Candidates

So far this cycle, Morgan Stanley's PAC has given 71 percent of its donations to Republican candidates, its highest proportion ever, according to PoliticalMoneyLine.

``I have not seen any change from the Republican to the Democratic Party,'' said Richard Hunt, the head lobbyist for the Securities Industry Association, a Washington-based group that represents companies including Goldman Sachs and Morgan Stanley.

``We continue to enjoy strong support from the financial community,'' said Tracey Schmitt, a spokeswoman for the Republican National Committee in Washington.

The Center for Responsive Politics didn't include donations that company and trade group PACs make to so-called leadership PACs, fund-raising organizations set up for lawmakers which then use some of the money they raise to help other candidates. Often, company and trade groups give more money to Republican leadership PACs than to Democratic PACs.

Still, if Democrats take control of at least one house of Congress, bankers and fund managers will have to cultivate relationships among a new set of committee leaders, some of whom have ideas about taxation and regulation that may not be well- received in the industry.

``I would imagine that is one of the calculations they are making now'' when financial-industry leaders are planning their donations for the rest of the year, Krumholz said.

To contact the reporters on this story: Michael Forsythe in Washington at mforsythe@bloomberg.net; Christine Harper in New York charper@bloomberg.net.

Last Updated: April 24, 2006 12:03 EDT