Two months ago, in a dimly lit corner banquette at an exclusive club in the meatpacking district, two well-known billionaires sat down — at a table well within earshot of mine — to have a good bitch about the state of the union.
"The last four years have been a disaster," said one man, a hedge fund manager who supported President Obama’s 2008 campaign but decided to sit this election out. The primary reason for his disillusionment, he said, was that the country under Obama had grown hostile to wealth, and to those who had accumulated vast amounts of it.
“People work their asses off to get where they are, and they get punished,” he said. “I wanted to fly my friend to Davos this year, and people were like, you're not going to fly the jet to Davos, are you? How will that look to the Occupy people? I’m like, what the fuck are you talking about? I worked hard for this!”
"It's a scary reality," said the other billionaire, once a prominent Democratic donor.
After a long, drawn-out pause, the hedge funder sipped his drink and said, "I'm afraid Obama's going to win."
"I am, too."
The supposed victimization of America's financial elite in the last few years has been almost entirely self-imagined. Sure, the Occupy movement sparked a national conversation about income inequality and spooked rich people into putting extra deadbolts on their beach houses. Sure, the one percent had been attacked in the media and targeted by politicians, including Obama, who wanted to raise their taxes.
But besides hurt feelings and vague threats, the actual political and financial damage done to the Wall Street elite during Obama's first term was approximately nil. On the contrary, banker bonuses remained high, the Dow Jones Industrial Average nearly doubled, and corporations saw their profits grow an astounding 77.9 percent a year. Obama continued the Bush-era bailout plans for big banks, and rich people were still the beneficiaries of a friendly tax code, thanks in part to a carried-interest loophole that Obama never got around to rolling back. Their grip on the legislative branch was still strong, thanks to an army of paid lobbyists who were chipping away at Dodd-Frank and other regulation on Capitol Hill.
After helping him get elected — a full 20 percent of Obama's 2008 campaign war chest came from the financial sector — Wall Street turned very quickly against Obama, and it made a massive bet that they could put a private equity guy in the White House. The bet turned out to be risky and unhedged — the equivalent of wagering a billion dollars on an exotic derivative that would either triple in value or become totally worthless, with no possible results in the middle. By the time election night rolled around, Romney’s five biggest sources of campaign cash were Goldman Sachs, Bank of America, Morgan Stanley, JPMorgan Chase, and Credit Suisse, each of which saw employees give at least $600,000 to the cause. Hedge fund managers and private equity titans poured seven-figure checks into conservative super-PACs, while President Obama struggled to fill Upper East Side fund-raisers.
Backing Romney was a tactical decision, but it was also a psychological one. Under a Romney administration, these donors believed, no longer would they need to hang their heads, hide their jets, and apologize for their success. The social order would be restored, and they could walk proud once more.
"The history of our country is not to hold up wealthy people as villains but as beacons, as magnets, as examples that you'd want to emulate," Bob Israel, a private equity executive, told the L.A. Times at a Romney fund-raiser earlier this fall.
But a funny thing happened on the way to a bought-and-paid-for election. Wall Street and the rest of the billionaire super-PAC donors ended up not mattering in the least. Obama was handily reelected, despite having many fewer maxed-out campaign checks and friends on Wall Street this time around. And Wall Street, used to being important, was left feeling more impotent than ever.
“I want my money back!” one high-ranking bank executive and Romney supporter said, only half-jokingly, on a Wednesday morning conference call for Republican bundlers, according to a person who was briefed on the call.
"It's a zero-percent return," another Romney donor, a private equity executive, groused on Wednesday.
At an Election Night party held at the Connecticut estate of a prominent Romney backer, many of Wall Street’s boldface names fell silent as swing states began being called for the incumbent. When Florida appeared to be tipping toward Obama, one party attendee said, “it was like a bomb went off in the room.” (Florida being Florida, we're still waiting for actual results.)
For an industry filled with prudent risk managers, Wall Street seemed to have missed the biggest risk of all — that their efforts would fail to move the needle on Romney's victory chances.
“All I can say is the American people have spoken,” Ken Langone, the billionaire founder of Home Depot and a huge Romney fund-raiser, told the Times on Wednesday, while slumping around the private jet terminal of Boston's Logan Airport.
It wasn't losing money that stung the most. Even the biggest checks written represented a fraction of a fraction of the donors' net worth. And it wasn't, in most cases, that the financiers feared higher taxes and lower growth in a second Obama term. The bigger fear is that Obama, a president who never treated Wall Street with reverence — who once said of big-bank CEOs, "These guys want to be paid like rock stars when all they’re doing is lip-syncing capitalism" — will now be free to ignore the Masters of the Universe completely.
The irony is that, for all of Wall Street's bluster, President Obama was actually fairly accommodating of the finance world during his first term. He continued the Bush-era bailouts, invited bank CEOs to the White House, and supported a version of Dodd-Frank that was easily watered down during the rule-writing process. He appointed two chiefs of staff in a row with Wall Street CVs (first, JPMorgan Chase's Bill Daley, then Jack Lew, a former Clinton official who then worked at Citigroup).
In his second term, that could well change. Obama will probably not morph into a fierce anti-bank reformer who will set out to make Wall Street's life miserable. (That duty will fall to Senator-elect Elizabeth Warren). But when it comes to Wall Street's influence in the White House — to treating bank executives as wizened statesmen whose counsel is sought on economic issues — a second-term Obama will feel much freer to tune those voices out.
That pending irrelevance, coupled with the sting of an unexpected loss, is taking a toll on the barons of midtown east.
“Wall Street turned on Obama, and Obama won without them,” said one wealthy financier, a former Goldman Sachs executive who gave a modest amount to the Romney campaign. “Now, these guys are marooned.”