Wall Street leaders descending on Davos this week will drink cocktails at Hotel Schatzalp, consort with Nobel laureates and try to “reshape” capitalism, as the World Economic Forum’s website puts it.
They won’t be doing it with as much vitriol as in previous years, when financiers including Blackstone Group LP Chief Executive Officer Stephen Schwarzman lashed out at government leaders, according to interviews with seven executives of firms with ties to the banking industry who are attending the annual Swiss Alpine meeting.
Following the second inauguration this week of President Barack Obama, whose re-election Wall Street spent a record amount to prevent, financial elites gathering in Davos say overt antagonism has fallen out of fashion.
“We have to move on in our society,” Schwarzman said today in an interview in Davos with Bloomberg Television’s Erik Schatzker. “I like President Obama as a person, and he’s well-intentioned.”
Schwarzman, 65, warned in Davos in 2010 that banks could restrict lending because “their entire world is being shaken and they’re being attacked personally.” Later that year, at a nonprofit group meeting, he likened Obama’s tax proposals to Hitler’s invasion of Poland. Third Point LLC CEO Daniel Loeb, who in 2010 compared Wall Street’s Obama supporters to “battered wives,” will help lead a Jan. 25 Davos dinner discussion, “Can Capitalism Evolve?”
“The best way forward is to work with the people in Washington,” said Archibald Cox Jr., 72, chairman of Barclays Plc’s Americas business until June 2011 and a backer of Republican candidates last year. “You don’t stand up and challenge openly the administration.”
This year, more than two dozen executives from Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. will converge on Davos after Wall Street employees gave $21 million to Mitt Romney, more than any presidential candidate since the modern campaign system began with the 1976 election, according to the Center for Responsive Politics, a research group that tracks campaign contributions. The six biggest contributors to Romney were banks, while Obama was the only major nominee in 20 years whose top five funding sources didn’t include the banking industry, according to data compiled by Bloomberg Government.
Executives know they have to live with four more years of Obama and will be making fewer “big, loud public statements,” said Hans-Paul Buerkner, chairman and former CEO of Boston Consulting Group Inc., which advises global banks on strategy and costs.
“Business people are usually quite pragmatic,” Buerkner said. “They are not politicians, they are not ideologists, they want to do as well as possible.”
Romney’s loss to a champion of financial regulation wasn’t Wall Street’s only disappointment. Citigroup CEO Vikram Pandit, co-chairman of last year’s meeting, was ousted in October following setbacks with regulators. Barclays CEO Robert Diamond, who said at Davos in 2012 that politicians arguing against pay for failed bankers should also talk about rewarding success, left in July after the London-based firm was fined 290 million pounds ($460 million) for rigging global interest rates.
“Wall Street is pragmatic, if nothing else,” said Peter Weinberg, co-founder of Perella Weinberg Partners LP, a New York-based advisory and asset-management firm, and a former CEO of Goldman Sachs International.
Schwarzman apologized in 2010 for his comparison of Obama’s effort to double taxes on private-equity income to the invasion of Poland. He said the analogy was inappropriate and that the administration’s need to work with business “is still of very serious concern.”
The Blackstone co-founder, who held a December 2011 fundraiser for Romney at his Park Avenue apartment, is worth about $6.8 billion, according to the Bloomberg Billionaires Index. His firm, whose holdings include hotel chain Hilton Worldwide Inc. and SeaWorld Entertainment Inc., is the largest U.S. private real-estate owner. Its shares have fallen 42 percent from their $31 initial-public-offering price in 2007.
Obama didn’t shun Wall Street. His economic team has included Lawrence Summers, who was paid more than $5 million by hedge fund D.E. Shaw & Co., and former Citigroup managing director Jack Lew, nominated as Treasury secretary this month. Obama also appointed Mary L. Schapiro, former CEO of the Financial Industry Regulatory Authority, to head the Securities and Exchange Commission, and made former JPMorgan executive William Daley his chief of staff.
While Attorney General Eric Holder vowed in 2009 to prosecute those responsible for the financial crisis, no senior Wall Street executives have faced criminal charges.
Still, Buerkner said bankers felt the White House’s pursuit of Wall Street and public anger at bankers was unfair.
“There was no voice of the business community in the first administration,” said Colin Dyer, CEO of Jones Lang LaSalle Inc., a Chicago-based commercial-property broker, citing Daley’s departure after one year. He said he expects the second term to be “more balanced.”
Bankers see compromises as losses, according to Erwann Michel-Kerjan, managing director of the Wharton Risk Management & Decision Processes Center at the University of Pennsylvania.
“You cannot be angry all the time,” said Michel-Kerjan, 37, who helps prepare an annual global-risk report issued by the World Economic Forum and has consulted for banks. “At some point you have to calm down and say, ‘What do we do about it?’”
Bank profits are at stake. Early this year regulators will finish drafting the Volcker rule, the part of the 2010 Dodd-Frank Act limiting proprietary bank wagers, Federal Reserve Chairman Ben S. Bernanke has said. The draft proposal drew 18,000 comment letters, including complaints from banks that the rule is too complex and could hurt economic growth.
Personal wealth is at stake, too. Even after Congress’s Jan. 1 budget deal raised the top rate private-equity managers pay on some profits to 20 percent, that is about half of the top rate for ordinary income. Maintaining that preferential treatment is “a greed issue,” said Cox, chairman of private-equity firm Sextant Group Inc.
Wall Street will pursue its agenda more constructively in small meetings with the White House, according to Buerkner and two executives who have supported Obama.
“I think we have, on both sides, better understanding,” said Glenn Hutchins, 57, co-founder of Silver Lake Management LLC, a Menlo Park, California-based private-equity firm.
Joe Echevarria, CEO of accounting firm Deloitte LLP, agreed, saying that adjustments aren’t instant.
“These are humans,” Echevarria said. It “takes time for those emotions to go from one extreme to the other.”
In Davos today, Schwarzman said he does have one regret. “The team that I was involved with lost.”