Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among Wall Street firms likely to rally if Mitt Romney is elected president, giving U.S. banks a reprieve from being top political targets, according to FBR Capital Markets Corp. analysts.
Romney, who’s favored to win today’s New Hampshire primary, will get the Republican nomination and beat President Barack Obama in November, bringing with him a regulatory team that’s friendlier to big banks, said FBR’s Paul Miller, a Republican, and Ed Mills, a Democrat.
“Romney is going to take over the elections and by the summer it will be apparent that Obama will lose,” Miller said last month in an interview at Bloomberg’s headquarters in New York.
A tracking poll by the Suffolk University Political Research Center in Boston showed yesterday that Romney had 33 percent of the likely voters in New Hampshire’s primary. Support for the ex-Massachusetts governor and former head of private-equity firm Bain Capital LLC has slid from 43 percent in Suffolk’s survey on Jan. 2.
Miller, who started his career as an examiner for the Federal Reserve Bank of Philadelphia, and Mills, who previously worked in Congress, discussed the impact of the election on financial stocks in a note to clients last month.
The prospect of Republicans taking the White House and full control of Congress may prompt a rally in bank shares by mid-year, said Miller, who has ranked among the best stock pickers by Bloomberg and Forbes.com.
If Obama wins, it will be because the economy has actually improved, “which will also be a tailwind for financials,” Mills said today in an e-mail.
‘Rooting’ for Repeal
“It should come as little surprise that there are some on Wall Street who are rooting for Wall Street reform to be repealed, Wall Street to write its own rules again, and for the first-ever consumer watchdog to be eliminated,” Ben LaBolt, Obama’s campaign spokesman, said in an e-mailed response to the comments by Miller and Mills.
U.S. bank stocks fell along with earnings last year and were the worst performers among 10 industries tracked within the Standard & Poor’s 500 Index. Financials dropped 18 percent, led by a 58 percent plunge for Bank of America Corp. Goldman Sachs dropped 46 percent, and JPMorgan, the largest U.S. bank by assets, was down 22 percent.
If Romney wins the presidency, “the first thing that happens is that the five main regulators will all be replaced,” Miller said, referring to the Securities and Exchange Commission, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Commodity Futures Trading Commission and Consumer Financial Protection Bureau.
Miller said Romney would probably keep Federal Reserve Chairman Ben S. Bernanke and his policies of low interest rates and high liquidity in the markets.
“Romney is a business guy; he knows, more so than anyone else, how accommodative you need to be right now,” Miller said.
“Bank bashing” also will fall off the front page of the news, he said. “If Bank of America wants to charge $5 for a debit card, you’re not going to see the president of the United States come out and say how dare they do this and rip off poor people,” he said.
Obama reprimanded Bank of America in October after it announced plans to charge customers a $5 monthly fee for debit cards, which the lender said was aimed at recouping revenue lost because of caps on so-called swipe fees, or interchange. Obama initially said that banks didn’t have an “inherent right” to charge the fee. He cited it as an example of “why we need somebody whose sole job it is to prevent this kind of stuff.”
Bank of America reversed course in November after SunTrust Banks Inc. and Regions Financial Corp. decided to eliminate check-card fees.
Obama and Democrats will target votes by using the hostility toward U.S. banks as a core campaign issue, according to Miller, who said the election will rest on who seems most capable of reviving the U.S. labor market.
Employers added 200,000 jobs to payrolls in December, the most in three months, a Labor Department report showed last week. The U.S. unemployment rate declined to 8.5 percent, the lowest since February 2009, from 8.7 percent in November. Financial companies worldwide announced plans last year to cut more than 200,000 jobs, up from 58,000 in 2010, according to data compiled by Bloomberg.
“Elections are decided by the American people, not by formulas and crystal balls, and ultimately they will decide between a president that fights everyday to restore economic security for the middle class, and a Republican candidate who wants to return to the same policies that caused the economic crisis,” LaBolt said in his statement.