Wall Street Ignores Summer of Trump
Julian Gingold, a stockbroker at UBS Group, has a simple formula for deciding whom to back in the Republican presidential primary: the most conservative candidate who can win. Anthony Scaramucci, who runs a hedge fund-of-funds business, likens the choice to picking a top executive.
"I want to be part of the hiring process of someone that’s controlling more than half of my income," Scaramucci said in an interview, adding that he pays a 51 percent marginal tax rate on his earnings. "Here are the problems. Here are the resumes that come in for the job."
In their midtown offices and Upper East Side townhouses, Wall Street financiers are sizing up presidential candidates and laying their bets, often with the same dispassionate arithmetic they use to identify a stock that's on its way up. While populist insurgents Donald Trump and Ben Carson top Republican polls and Bernie Sanders draws crowds of Democrats, Wall Street donors and fundraisers so far show little sign of abandoning mainstream candidates like Jeb Bush, Marco Rubio, and Hillary Clinton.
Wall Street's picks have more in common with Betfair and PredictIt, markets where you can bet on a candidate, than they do with political polls. The venues have given Bush and Rubio the best odds of winning the nomination even as Trump surged ahead of them in the polls. Gingold says many on Wall Street—himself excluded—care less about policy than about betting on the fastest horse.
"They have no ideology, they don’t care," he said. "They want to be with the winner and be invited to the White House."
Another hint of donors' preferences will come into view next week when campaigns disclose their fundraising results for the three months ending in September. During the first half of the year, Clinton, Bush, and Rubio reported the biggest campaign fundraising hauls from the New York area.
Gingold had been part of a smaller Wall Street tribe favoring Scott Walker, the Wisconsin governor who withdrew from the presidential race late last month. Gingold said he hasn't settled on another candidate but mentioned he plans to attend a gathering next week for Rubio, along with about a dozen Walker supporters he knows.
A 15-minute phone call with Bush a few days ago was enough to convince Scaramucci, a finance chairman in the Walker campaign, to play a similar role for the former Florida governor. In Milwaukee, money manager Ted Kellner of Fiduciary Management plans to host a Bush fundraiser next month after earlier giving $50,000 to a pro-Walker group.
Before Walker's withdrawal, the billionaire Ricketts family had been slated to host a fundraiser for him last month at its midtown Manhattan apartment. The family fortune springs from the TD Ameritrade online brokerage, and its support is among the most coveted by Republican political candidates. The Ricketts haven't settled on another favorite yet, according to a person with knowledge of their thinking. In all, they'd put more than $5 million into groups backing the Wisconsin governor.
Among others who might be up for grabs after Walker's departure include the hedge-fund managers Kenneth Griffin and John Paulson, both of whom had written five- or six-figure checks to groups backing Walker as well as other candidates.
Some of the most influential donors in the country have yet to make any public commitments in the GOP nomination fight, including Paul Singer, the boss of New York hedge fund Elliott Management, and Sheldon Adelson, the Las Vegas casino operator. Freedom Partners, part of the libertarian-oriented network overseen by the billionaire industrialists Charles and David Koch, is highlighting five GOP candidates it deems worthy of its donors' attention. According to spokesman James Davis, the five are Rubio, Bush, Rand Paul, Ted Cruz, and Carly Fiorina, who was recently added to the list.
The Rubio fundraiser takes place next week at the offices of Philip Rosen, a lawyer at Weil Gotshal & Manges who's on the board of the Republican Jewish Coalition and whose clients include real-estate and private-equity firms. It'll be followed a few days later by a Bush event where co-hosts include executives at Highbridge Capital, Goldman Sachs, and Warburg Pincus, according to a copy of the invitation posted online by Politico.
To be sure, virtually every candidate has been passing through Wall Street to woo potential donors. John Loeb, a former ambassador whose forebears founded the Loeb Rhoades & Co. brokerage, recently hosted an event for Chris Christie at his East Side residence. Ken Abramowitz, a health-care venture capitalist, held a gathering for Ted Cruz. John Kasich drew a roomful of CEOs when he took part in a meet-and-greet hosted by the Partnership for New York City at the offices of Blackstone Group. Even Trump, a billionaire real-estate developer who has pledged to mostly self-finance his campaign, appeared at a fundraiser hosted by insurance executive Pamela Newman.
Among Wall Street Democratic donors and fundraisers, it's hard to find any who are supporting Sanders, whose populist campaign is exciting the party's left wing and is supported by $20 or $50 donations from across the country.
Clinton raised a record $48 million in the first half of 2015, including $17 million from New York State, which she once represented in the Senate.
Sanders "is not going to win," said Marc Lasry, a New York hedge-fund manager and veteran Democratic fundraiser, on Bloomberg Television this week. "America is not ready for a socialist president."
Wall Street's enthusiasm for Bush continues even though many polls have him in the single digits and he's proposed to raise taxes on carried interest, a key component of income for many types of investment fund managers that is currently taxed at a preferential lower rate.
There's a lot to like in Bush's tax plan even for those affected by the carried-interest proposal, said Marc Stern, a Bush fundraiser and chairman of TCW Group, a Los Angeles-based investment manager.
"If you simplify the whole system and if you lower the rates, that's a good trade to me," he said.
Even Stephen Schwarzman, who's been an outspoken defender of carried-interest taxation, sounded a conciliatory note on the issue when asked about it on Bloomberg Television this week, saying only that any changes to the tax code ought to be part of a fundamental revamp that makes the system fairer for everyone. Schwarzman is the billionaire co-founder of the private-equity firm Blackstone.
Although Schwarzman gave $100,000 to a pro-Bush super-PAC earlier this year, a person with knowledge of his political views said he hasn't decided on a GOP candidate yet.
It's clear, though, he's no fan of Trump. At a charity fundraiser in August in East Hampton, someone asked him whether he would consider running for president. "I'd be," he quipped, "the only non-insane businessman candidate."