Urjit Patel, Overdraft, Saving the Indian Saver. Viral
64
Finance & economics
The Economist
September 5th 2020
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1
more complete labour-market recovery.
Whether policy will change much in
practice is as yet unclear. Markets, for their
part, appear not to see a radical change of
regime in the offing. Market-based mea-
sures of inflation expectations are around
1.7%, below the Fed’s 2% target. American
stockmarkets, which seem to soar at the
gentlest of nudges, have rallied, some hit-
ting record highs in the past week. More
important is the reaction in foreign-ex-
change
markets.
The
greenback
has
slipped nearly 1% against a basket of major
currencies since Mr Powell’s speech, bring-
ing its total decline since May to about 8%.
A weakening dollar could indicate that
markets see more room for policy di-
vergence between the Fed and other central
banks, most notably the European Central
Bank, whose mandate does not explicitly
require it to minimise joblessness.
Under any circumstances, the macro-
economic developments which led the Fed
to revise its strategy would no doubt have
influenced other central banks to adjust
their own policies. But in weak advanced
economies with interest rates close to zero,
currency appreciation against the dollar
places a drag on spending which cannot
easily be offset by further easing. The Fed
may thus find that its modest adjustment
encourages imitators elsewhere in surpris-
ingly short order.
7
T
he ties
between Wall Street financiers
and politicians are the subject of a lot of
scrutiny. Not for nothing is Goldman
Sachs, a bank, sometimes nicknamed
“Government Sachs”. But how important
are the moneybags in New York to political
success in Washington,
dc
? Quantifying
the relationship can be done using the ex-
tensive data collected about campaign do-
nations. It’s not an uplifting exercise.
The first task is to decide who counts as
Wall Street’s elite. As well as encompassing
the bosses of banks like JPMorgan Chase
and Morgan Stanley, they also include the
heads of some hedge funds, private-equity
shops, asset managers and wealth-man-
agement firms in New York, New Jersey
and Connecticut. In addition are billion-
aire New Yorkers on the
Forbes
list, who
have earned their wealth via some form of
finance, such as Michael Bloomberg of the
eponymous financial-information firm.
Totted up this way, the financiers amount
to 68 people. Of these, 52 have given money
to political campaigns in at least one of the
two most recent general-election cycles
(2015-16 and 2019-20). Together they are
worth $310bn and manage firms with as-
sets of over $32trn.
Estimates of their political contribu-
tions are drawn from campaign-finance
data in the Federal Election Commisson, a
regulator.
The Economist
has attempted to
contact larger donors to verify them. Not
all have responded. Most of these Wall
Street donors hedge their bets; they give to
campaigns from both parties. But the big-
gest contributors have, in the past, tended
to be one-party loyalists (see chart). Eight
of the 52—including Cliff Asness of
aqr
Capital
Management, an investment-man-
agement firm; Robert Mercer, then co-
ceo
of Renaissance Technologies, a hedge
fund; and Paul Singer of Elliott Manage-
ment, an activist-investment firm—gave
exclusively to Republican campaigns in
the 2016 election cycle. Nine—including
Mr Mercer’s then-colleague Jim Simons,
who founded Renaissance, George Soros, a
hedge-fund veteran, and David Elliot Shaw
of D.E. Shaw, another hedge fund, gave only
to candidates of the Democratic Party.
In the intervening years, the pro-Re-
publicans have appeared to grow less parti-
san. Just three of them have remained Re-
publican-only, including Mr Singer and Mr
Mercer. Total donations went mostly to Re-
publicans in 2016, but are now evenly split.
Political leanings aside, much else has
shifted since the last election. Firstly, the
sums given have fallen. In 2016 the finan-
ciers provided $130m to political cam-
paigns, or 1.4% of the total raised. So far
this cycle, their share is just 0.5%. Striking-
ly, many appear to be sitting 2020 out;
around a fifth of those who gave meaning-
fully in the last election have given nothing
in 2020. This decrease is largely the result
of a drop in contributions to the presiden-
tial campaign, particularly that of Donald
Trump. Stephen Schwarzman of Black-
stone, a private-equity firm, who has given
more than $18m this year, compared with
around $5m last time, is the only titan who
has increased his share to the president. Mr
Mercer gave more than $15.7m to
Trump-affiliated committees in 2016. This
time he has given less than $400,000.
It is a similar story with Joe Biden, the
Democratic challenger. His two biggest
Wall Street supporters are Mr Soros and Mr
Shaw, both of whom have given around
$500,000 each—less than they had given to
Hillary Clinton at this point in her race
against Mr Trump in 2016.
The congressional races are attracting
more attention. The Wall Street group has
given over $8m to Senate races and $19m to
House races, triple the total contributed to
congressional races at this point in 2016.
The “Senate Majority
pac
” (
smp
) is particu-
larly popular with Democratic donors. Mr
Shaw has given more to Senate campaigns
than he has to Mr Biden. Mr Simons has
given $3.5m to the
smp
.
The Senate race is of keen interest be-
cause it is considered particularly tight.
But the lowly sums in the presidential bat-
tle may reflect a dispiriting reality—that
neither Mr Trump nor Mr Biden generates
much enthusiasm. At least those worried
that Wall Street has Washington in its
pocket can console themselves that so far
the financiers are not providing the sort of
sums that can help define the race.
7
N E W YO R K
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