Republican presidential hopeful Mitt Romney has raised about six times as much cash from the employees of Wall Street firms as has President Barack Obama, according to a New York Times analysis of recent campaign finance filings. This discrepancy is particularly noteworthy, given that the financial services industry was a major backer of Obama’s 2008 campaign. In fact, Goldman Sachs (NYSE:GS) was Obama’s biggest supporter in the private sector: Its workers coughed up $1 million last time around.
So far in this election season, that same group has offered up a mere $45,000 for the president, dwarfed by the $350,000 they have given to the Romney campaign.
What’s changed in three years? Bear with me as I point out the obvious.
Remember that most of the Wall Street money Obama received came before Lehman Bros. collapsed in September 2008, setting in motion a financial death spiral. Obama’s response to the collapse of the financial industry could not have been known by those working in the industry before it actually cratered.
The response came in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which aims to address the structural problems that led to the credit boom and bust. It is a massive piece of legislation, the details of which still are being written by the bureaucracy. All of the GOP presidential contenders have made repeal of Dodd-Frank a major part of their platform, second only perhaps to the repeal of Obama’s other major accomplishment — health care reform.
The full effects of Dodd-Frank will not be clear for some time, but it is becoming painfully obvious to the financial service industry that profits will be squeezed and the entire sector likely will shrink. While some (e.g., Paul Krugman) argue that less finance is exactly what we need, others, like Mitt Romney and his GOP rivals, contend that the regulatory burden imposed by Dodd-Frank is too costly, will constrain credit and will dampen growth.
Romney’s empathy for Wall Street on this issue clearly has worked, as his financial records show. But it could prove to be a big problem for him in the general election.