Monday, November 5, 2012

Goldman Sachs Presidential Election bets

When a financial institution and/or its particulars buy a certain stock, makes an investment or follow a definitive strategy with regard to both, we are apt to call such moves "bets." Jon Corzine, for instance, made a big bet--a huge one, in fact--on European sovereign debt. And he lost, thus precipitating the collapse of MF Global. The financial crisis of 2007-2008 was caused in part by big bets on mortgage-backed securities.

These moves are bets because the future is still unknown, thus the moves are made hoping for a future that will result in financial gain. But what about political contributions? It's not much of a leap to assume that people involved in this kind of financial activity approach such donations in a similar way, both because of the actual consequences of a candidate's choices in office and because of the reality of patronage: meaningful financial support of a candidate creates access. The last is a simple reality, regardless of how distasteful some  (most) might find it.

With that in mind, let's look at Goldman Sachs--emperor of the financial world--and its past donations to Presidential candidates (all data from OpenSecrets.org), starting in 1992 and going forward to the present with Dems in blue and Repubs in red:

1992 Presidential Election:
Candidate: Bill Clinton
Goldman Sachs total contributions: $102, 275 
Candidate: George Bush
Goldman Sachs total contributions: $68,250
1996 Presidential Election:
Candidate: Bill Clinton
Goldman Sachs total contributions: $44,384 
Candidate: Bob Dole
Goldman Sachs total contributions: $0
2000 Presidential Election:
Candidate: Al Gore
Goldman Sachs total contributions: $98,250 
Candidate: George W. Bush
Goldman Sachs total contributions: $138,499
2004 Presidential Election:
Candidate: John Kerry
Goldman Sachs total contributions: $311,250 
Candidate: George W. Bush
Goldman Sachs total contributions: $394,600
2008 Presidential Election:
Candidate: Barack Obama
Goldman Sachs total contributions: $1,013,091 
Candidate: John McCain
Goldman Sachs total contributions: $240,295
2012 Presidential Election:
Candidate: Barack Obama
Goldman Sachs total contributions: $184,925 
Candidate: Mitt Romney
Goldman Sachs total contributions: $994,139
The first thing that jumps out from this list is a simple fact: in every Presidential Election from 1992 through 2008, total Goldman Sachs monies (GSM) ended up favoring the eventual winner. And the greater the advantage of a particular candidate in GSM (percentage wise), the more the likelihood of a clear victory. In years of uncertainty--like 1992, 2000, and 2004--GSM flowed to both candidates.

In my opinion, this is strong evidence of attempts to maintain access, for Goldman Sachs--via one person or group beholding to Goldman Sachs--to have a seat at the table, regardless of which candidate triumphed. In the years where there was less uncertainty of the eventual result--1996, 2008--GSM went mostly to one candidate.

However, this doesn't wholly negate the issue of the economic consequences of a candidate's offered policies. One could argue that in 1996 a second Clinton presidency meant a status quo for an economy that was quite strong. Similarly, in 2008 another Republican presidency--in the form of McCain--meant a continuation of a weak, if not collapsing, economy. Thus sometimes the disparate concerns lead to the same conclusion, with regard to which candidate should be supported with GSM.

Which brings us to the current Election. Goldman Sachs' level of access in the Obama Administration is well-documented. So what's with the reversal of fortune for the Obama Campaign? After receiving over $1 million in GSM during 2008, the campaign has now received less in 2012 than McCain did in 2008. Meanwhile, Romney is apparently receiving all of the support that was once Obama's.

A Wall Street Journal piece offers the argument that Goldman Sachs--and other firms--feel betrayed by both Obama and Democrats in general:
In interviews with more than a dozen past and current Goldman executives, many said they felt betrayed by Democratic lawmakers and the White House, for years considered friendly allies. Several Goldman executives said they didn't want to speak out publicly against the president, and that their donations speak for themselves.
Seems like a sound argument, consistent with the trends of GSM over the past three years. But I still wonder about the movement of GSM in terms of a bet. Because that's the way people in this business think. They'll bet against an emotional favorite in a heartbeat, if they think it's a strong play. And history shows most GSM tend to end up on the winning side.

Is Goldman Sachs telling us the smart money is actually on Romney? Wouldn't that be a hoot...

Cheers, all.

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