Photographer: John Taggart/Bloomberg

Did Wall Street Just Become Irrelevant in the Election?

A look at the unpalatable choice now facing the nation's financiers.

Back in December, CNBC interrupted its regularly scheduled programming for an important announcement. Ken Griffin, the billionaire founder of hedge fund firm Citadel Investment Group, had decided whom he was going to back in the presidential race: "I'm really excited to be supporting Marco Rubio," Griffin said at the time. "He will be the next president of the United States."

Now that the Donald Trump steamroller finally laid waste to Rubio's campaign following Tuesday's five primaries, including a decisive defeat in Rubio's home state of Florida, Wall Street donors such as Griffin are left in an uncomfortable position. After first supporting Scott Walker's campaign (until he dropped out last September) and then Jeb Bush (who dropped out last month), many politically engaged financiers settled on Rubio as the remaining candidate who had the best chance at winning and whose views most aligned with their own. With Rubio now out of the picture, the prospect of political irrelevance looms for many Wall Street donors—and that's not a feeling they're used to.

In addition to Griffin, Rubio also had the backing of Paul Singer, the influential founder of Elliott Management Corp., who was heavily involved in raising money for the campaign. “He is accustomed to thinking about American foreign policy as a responsible policy maker,” Singer wrote of Rubio back in October. “He is ready to be an informed and assertive decision-maker.” The founder of AQR Capital Management, Clifford Asness, was also a supporter. Even employees of Goldman Sachs Group Inc. had had started to funnel money to the Rubio campaign, after initially favoring Bush. 

Hedge fund and private equity managers are driven by one issue that is central to their economic well-being: the carried interest tax. In the past, a commitment to preserving this special, low rate for hedge fund and private equity partnership profits has been critical to gaining support from executives in both industries. Rubio was committed to it. But one of the first promises Trump made as a candidate was to do away with the carried interest tax loophole, which sent waves of fear across Wall Street and Greenwich, Conn. "They're paying nothing and it's ridiculous," Trump said on CBS back in August, referring to hedge fund managers. “The hedge fund guys didn't build this country. These are guys that shift paper around and they get lucky." He went on: “It's like they’re paper pushers. They make a fortune, they pay no tax. ... The hedge funds guys are getting away with murder.”

The choice for the country's top private investors regarding which candidate to support has become, as of Tuesday night, decidedly unpalatable. Not that it was great before. Successful investors like to bet on as close to a sure thing as possible. Backing Trump means signing on with someone who has proven to be nothing if not unpredictable and uncontrollable and who has already criticized them openly. Not getting involved with the Trump campaign, on the other hand, would be an acknowledgement of irrelevance to the process.

One thing this election has proved so far is that the issues about which most billionaire investors care most are not the same as those that concern the rest of the population. The way the race has played out so far shows that enormous political donations can compensate for that gap only so much. The option of supporting Democratic frontrunner Hillary Clinton remains, but she has become increasingly critical of the financial industry during her protracted primary battle with Bernie Sanders. 

There's no reason for Wall Street folks to lose hope entirely. At the end of his victory speech on Tuesday, Trump acknowledged their importance to the economy: "We’re gonna make our country rich again," Trump said. "And we need the rich in order to make the great."

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