Mr. Smith Didn't Do This: How free market is Wall Street?

COMMENTARY Markets and Finance

Mr. Smith Didn't Do This: How free market is Wall Street?

Sep 24th, 2008 4 min read

Former Distinguished Fellow

Michael is a former Distinguished Fellow at The Heritage Foundation.

The blame game has begun.

To liberals, the financial meltdown results from recklessness by Wall Street's "big banking boys" who, as socialist Sen. Bernie Sanders (I., Vt.) explains, were "empowered by the extreme economic views of [former] Senator Phil Gramm, President George Bush, Sen. John McCain," and their ilk.

Beginning in the 1990s, this narrative goes, free market, Republican extremists told government regulators to take a hike so the barons of high finance could indulge in an economic free-for-all, thus producing our current travails. Numbered among these extremists, it seems, is retired liberal Rep. Jim Leach (R., Iowa), who coauthored a deregulatory measure now being ritualistically denounced by the left.

This narrative assumes that the typical Wall Streeter takes time off from Caligula-style orgies of predatory capitalism only to reread tattered copies of The Road to Serfdom. Or anything by Ayn Rand. Also assumed: that employees of Lehman Brothers, Bear Stearns, Goldman Sachs, and all other institutions now seeking Uncle Sam's assistance must be the financial muscle behind the modern conservative movement and the Republican party. How else could things have gone so terribly awry?

"Isn't it ironic," one pundit asked recently in the Washington Post, "that the same firms that preached free-market capitalism are now the ones begging for a taxpayer bailout?"

But are these firms really staffed by legions of modern-day Adam Smiths?

A review of Federal Election Commission data for the current presidential-election cycle sheds light on this important question. Judging by who they support for president, a strong majority of employees at the highest reaches of Wall Street's big financial institutions are, well, big liberals. More Wall Streeters shower far more money - both overall as well as on average - on the more liberal presidential candidates than on their more conservative alternatives. And this tilt to the Left predates the current election cycle.

All of the following data comes from searches conducted on Fundrace2008, the user-friendly aggregation tool on It lets you sort presidential campaign contributions by the contributor's employer. The data presented below are solely individual contributions from employees of the firms in question and do not reflect third-party contributions from employee political action committees, which appear to tell a somewhat different story. Nor does this analysis delve into employee contributions to candidates for the House and Senate.

Individual contributions to presidential candidates offer a window into the political and ideological souls of those making the contributions. Analyzing these contributions, then, can tell us something about the political and ideological cultures that permeate modern day Wall Street.

So, let's start where this whole financial meltdown started, at Bear Stearns and JP Morgan Chase.

At Bear Stearns, 157 investment bankers, managing directors, senior managing directors, and other financial sophisticates contributed over $264,000 to Democratic candidates. In contrast, 77 of their colleagues sent about half that amount - $122,000 - to the Republicans.

At JP Morgan Chase, the Democratic advantage, at 3 to 1, was even larger. Contributions to Sens. Obama, Clinton, Dodd, Biden, and Edwards totaled $275,000 from 238 elites in that firm. Republican presidential aspirants had to make do with $93,000 from 83 equally important-sounding people.

The story was much the same at Lehman Brothers. There, the Democratic field swept up over 560,000 pre-bankruptcy dollars from 272 former Lehman employees. Republican candidates received less than half that - $256,000 - from 145.

This Democratic advantage in both total contributions and number of employees contributing also holds at the latest casualties on Wall Street, Goldman Sachs and Morgan Stanley. Goldman employees cut checks to Democratic candidates totaling an astounding $789,000. At Morgan Stanley, the generosity was even greater: $818,000. Goldman Republicans contributed less than a third the amount of their Democratic colleagues; those at Morgan Stanley less than half.

But someone must have spiked the water coolers at Merrill Lynch. Alone among Wall Street's storied firms, Merrill Lynch's workforce favored the Republicans ($490,000) over the Democrats ($399,000). I'll leave it to others to decipher why the ideological leanings of Merrill's employees stand apart from the rest of the Street.

Employees at now-defunct American International Group also voted overwhelmingly Democratic with their dollars. According to FEC records, 118 AIG executives contributed $104,000 to the Democrats, about three times the $33,000 sent to the Republicans. AIG's Democratic tilt, moreover, mirrors the Democratic presidential field's strong performance in the insurance industry as a whole, as a review of contributions from employees of Met Life, New York Life, Prudential, The Hartford, Liberty Mutual, Nationwide, Geico, Allstate, and State Farm reveals.

The donation disparity is even more pronounced at Fannie Mae and Freddie Mac, those hybrid creatures of power politics that touched off the whole messy shebang.

Overall, 152 Fannie executives airdropped $146,000 on Democrats this presidential cycle, more than 7 times what Republicans received ($19,700). The contrast between Sens. McCain and Obama was even greater. Sen. McCain received slightly over $7,500 from 9 Fannie employees while Sen. Obama raked in 13 times as much (about $96,000) from 97 employees. At Freddie, the Democratic advantage was less overwhelming, but still daunting. Democratic candidates enjoyed a 4 to 1 edge, receiving $64,400 (Obama has received about $23,500) and Republicans $16,300 (of which McCain gets roughly $9,0000).

Okay, our liberal friends may say, the barons of Wall Street and titans of insurance may be overwhelmingly Democratic, but surely the old stereotype still holds true in the oil industry, right? "If my colleagues want to do something interesting," Rep. Anthony Weiner (D., N.Y.) said last week on the House floor, "go to look at the donations of ExxonMobil, look at Texaco, and look at the R's next to all the people who got it."

Weiner has a point when it comes to third party PAC contributions from firms such as Exxon Mobil and Chevron, which tilt decidedly to Republicans in the House and Senate. But, at the presidential level, the same left-of-center political and ideological culture seems to hold sway among employees in the oil sector. The Democrats' long march through America's elites did not stop at Wall Street. It even extends to Big Oil.

Here's the scorecard from the oil fields:

  • Chevron: Dems: over $69,000 from 90 employees. GOP $25,500 from 28 employees.
  • British Petroleum: Dems: nearly$42,000 from 48 employees. GOP: barely $15,000 from 16 employees.
  • Royal Dutch Shell: Dems over $44,000 from 53 employees. GOP: $12,600 from 17 employees.

Even the liberals' favorite petroleum-based piñata, Exxon-Mobil, preferred the Democrats in their employee-giving. Ninety-one Exxon-Mobil employees sent $94,000 to the Democratic field; 62 sent checks totaling $60,700 to the GOP contenders.

As the blame game takes shape, it should be noted that the corporate denizens enmeshed in this mess were far from rabid free-marketers. Rather, the elite members of this corporate culture are overwhelmingly enamored of a distinctly left-of-center approach to markets, the role of government, and risk.

Michael G. Franc is vice president of government relations for the Heritage Foundation

First Appeared on in the National Review Online