The Candidates On Wall Street
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The Manhattan headquarters of investment bank Evercore Partners Inc. (EVR ) isn't a place you'd expect to find people debating campaign strategies. But the firm hosted an historic gathering a few weeks back: the first meeting of Senator Hillary Clinton's (D-N.Y.) economic advisers, led by former Deputy Treasury Secretary and current Evercore Chairman Roger C. Altman. Also there: Steven Rattner, a partner at investment firm Quadrangle Group; Blair W. Effron of investment adviser Centerview Partners; and Stanley Schuman of investment bank Allen & Co.
The team is just beginning to refine Clinton's positions on the key issues facing Wall Street. Even though Clinton telegraphed her interest in running for President years ago, the early start to the 2008 campaign season caught the group off guard. "I don't think we were prepared to be starting this early," says a source familiar with the meeting.
It's a sentiment shared by most of the power brokers advising big Presidential candidates. Says Cesar Conda, an economic adviser to former Massachusetts Governor Mitt Romney and a partner at lobbying firm DC Navigators: "We could have a nominee by Feb. 5 of next year, which means we have to accelerate the development of our policy positions much faster than a lot of us are used to."
Sure Iowa, New Hampshire, and California are important. But another crucial contest in the most wide-open election season since 1928 is taking place right now on Wall Street. A mating ritual is under way that will determine who raises enough money to get his or her party's nomination--and which Wall Street backers have the most influence on policies affecting the economy, regulation, and global markets. Bear Stearns Cos. (BSC ) already has invited seven major candidates to its Midtown Manhattan headquarters for presentations and Q&As with more than 400 managing directors over the next several weeks. It set up the tour after being swarmed by election fund-raisers. (This way, Bear makes friends with everyone.) Wall Streeters, says Mary Matalin, veteran GOP strategist and adviser to Vice-President Dick Cheney, "never aren't weighing in." Her advice: Speak up loudly now for the greatest impact.
'MAKE THE PIE BIGGER'
As the listening tours crank up, the candidates are hearing what financiers care most about: global trade, federal spending, and regulation of financial markets. Executives also want reassurance that candidates can make smart decisions in times of uncertainty, a trait bankers and traders prize in themselves.
With the horse-trading between Wall Street and the candidates in full swing, some key issues are moving to the foreground. Perhaps the most important: free trade. Global markets have become far more prominent in the past few years, and financial types tend to believe that fewer impediments mean higher living standards for everyone. "Wall Street wants a barrier-free global marketplace," says Robert S. Nichols, president of the Financial Services Forum, a trade group for investment banks. "[It] is very concerned about protectionism."
Ray Dalio, founder of Bridgewater Associates (which manages $170 billion) and a backer of Senator John McCain (R-Ariz.), says he wants a President who will work first "to make the pie bigger and then think about how to divide the pie." Robert Wolf, CEO of UBS Americas (UBS ) and a supporter of Senator Barack Obama (D-Ill.), says his candidate understands commerce and is promoting trade agreements that benefit the U.S. "both as a consumer and a provider of goods and services." Clinton was clearly fine-tuning her trade position in a lament on the Senate floor on Feb. 28 about U.S. government debt held by China and Japan. "How," she asked rhetorically, "can we negotiate fair, pro-American trade agreements...when we sit across the negotiating table not only from our competitor but our banker as well?"
Beyond simple tariffs issues, bankers are also pushing for more uniformity in trading and accounting regulations. And they're worried about regulations that many believe threaten the competitiveness of U.S. financial markets. New York Stock Exchange (NYX ) CEO John A. Thain, a national co-chair of finance for the McCain campaign, was one of the first to complain to Washington that many of the Sarbanes-Oxley Act requirements on publicly traded companies hurt Wall Street and helped foreign markets. And Romney, a founder of the private investment firm Bain Capital, says SarbOx is "driving away IPOs, depressing jobs, and requiring billions of unnecessary cost."
Another contentious issue is hedge fund regulation. The Street wants Congress, which has been holding hearings on the secretive investment pools, to avoid the temptation of imposing heavy burdens that could prompt funds to move overseas. Some candidates have weighed in already. Obama co-sponsored a bill earlier this year that would increase reporting requirements for hedge funds. But he hasn't called for full-out Securities & Exchange Commission regulation.
The 2008 campaign should see plenty of bipartisan unity on the issue of fiscal responsibility. The federal budget deficit hit $248 billion last year, nearly a half-trillion-dollar swing from the $236billion surplus of 2000, according to the Congressional Budget Office. Wall Street wants an end to the deficits, and by and large the candidates are promising just that. Romney recently vowed that, if elected, he would cap nondefense discretionary spending at inflation minus 1%.
Like most voters, Wall Streeters are also trying to size up candidates' personal qualities. At a meeting on Feb. 3 in Manhattan, bankers grilled Obama about how he makes decisions. Present were Eric Mindich of Eton Park Capital, Frank Brosens of Taconic Capital Advisors, Michael Froman of Citigroup Alternative Investments (C ), and James S. Rubin of JPMorgan Chase's (JPM ) private equity fund, among others. Obama said a President must be able to make important decisions with little information. He cited his 2002 position against the Iraq invasion, which he arrived at without seeing the intelligence reports. That message "appealed to them because it was similar to the decisions that they make every day about risk, returns, and probability of various outcomes," says Froman, a law school classmate of Obama.
Similarly, Dalio, the Bridgewater chief who trades currencies, debt, and stocks around the world, likes the way McCain arrives at his positions. It's different from relying on academic knowledge or creative brilliance, says Dalio. "It is the ability to intelligently analyze and make decisions from a practical perspective....A successful President must have a lot of practical intelligence."
By David Henry and Eamon Javers