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CAMPAIGN '08: RACE FOR THE WHITE HOUSE

Democrats are darlings of Wall St.

Some fear donations will soften attitudes on financial regulation.

March 21, 2008|Janet Hook and Dan Morain | Times Staff Writers

WASHINGTON — Hillary Rodham Clinton and Barack Obama, who are running for president as economic populists, are benefiting handsomely from Wall Street donations, easily surpassing Republican John McCain in campaign contributions from the troubled financial services sector.

It is part of a broader fundraising shift toward Democrats, compared to past campaigns when Republicans were the favorites of Wall Street.

Some Democrats worry that the influx of money will make their candidates less willing to call for increased regulation of financial markets, which have been in turmoil after a wave of foreclosures on sub-prime mortgages.

These concerned Democrats argue that their candidates, and presumptive Republican nominee McCain, should be willing to push for financial institutions to accept more government regulation -- in exchange for likely future bailouts, such as the recent deal the Federal Reserve orchestrated for JPMorgan Chase & Co. to take over Bear Stearns Cos.

"I want to hear Clinton, Obama and McCain talk about a quid pro quo," said Jared Bernstein, an economist with the Democratic-leaning Economic Policy Institute. "If we don't hear it, especially from Democrats, it makes sense to ask why not and ask if they are inappropriately cozy with the financial services industry."

The flow of campaign cash is a measure of how open-fisted banks and other financial institutions have been to politicians of both parties. Concern is rising that "no matter who the Democratic nominee is and who wins in November, Wall Street will have a friend in the White House," said Massie Ritsch of the nonprofit Center for Responsive Politics, which tracks campaign donations. "The door will be open to these big banks."

Sen. McCain of Arizona got off to a slow start in presidential campaign fundraising. Having clinched the Republican nomination, he could gain momentum in attracting Wall Street money.

For now, though, Sen. Clinton of New York is leading the way, bringing in at least $6.29 million from the securities and investment industry, compared with $6.03 million for Sen. Obama of Illinois and $2.59 million for McCain, according to the Center for Responsive Politics. Those figures include donations from the investment companies' employees and political action committees.

In 2000, by comparison, Republican George W. Bush went on to win the White House after collecting nearly $4 million from the industry versus Democrat Al Gore's $1.4 million. In 2004, Bush received $8.8 million, twice what Democratic Sen. John Kerry collected.

Spokesmen for Obama, Clinton and McCain deny that the candidates' ideas on handling the economic crisis are being shaped by donations from Wall Street.

The candidates' receipts reflect a broader trend that demonstrates how money follows power in Washington. It suggests that the nation's money managers are betting heavily that either Clinton or Obama will capture the White House and that Democrats will retain control of Congress.

Lenders active in the sub-prime business, such as Ameriquest and Countrywide, were major political players in years past. But in the 2008 campaign, they are bit players, giving perhaps $120,000 to all presidential candidates.

The troubles in the financial markets, however, have spread from sub-prime lenders to some of the nation's largest banking corporations and investment houses that traded in the mortgages, as Bear Stearns' failure demonstrated. And PACs and employees of many of those businesses -- including Bear Stearns and its prospective new owner, JPMorgan -- have donated heavily to campaigns.

Citigroup, the nation's largest banking company, also was among those enmeshed in the sub-prime mortgage debacle, leading to billions of dollars in losses last year and the resignation of its chief executive, Charles Prince.

Merrill Lynch too had multibillion-dollar losses last year, mostly involving soured mortgage-related investments. Merrill Chief Executive Stanley O'Neal, an Obama donor, also was forced out last year.

Overall, Citigroup and Merrill employees have given $519,000 to Clinton, $386,200 to McCain and $354,000 to Obama since January 2007.

Clinton is a top beneficiary of large Wall Street firms in part because she represents New York. And Clinton's ties to the financial services industry extend beyond donations: A senior economic advisor to her campaign is Robert Rubin, Treasury secretary during her husband's administration and now a top official at Citigroup. The consulting firm of Mark Penn, her chief campaign strategist, worked for Calabasas-based Countrywide.

Also, Bill Clinton's administration oversaw significant changes sought by Wall Streeters, including the repeal of the Glass-Steagall Act to allow commercial and investment banks to consolidate.

Hillary Clinton's position on bankruptcy code overhaul -- among the most important pieces of financial legislation passed by Congress over the last decade -- has been difficult to decipher.

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