Why It's OK to Accept Wall Street Campaign Cash
What do Hillary Clinton, Barack Obama, Franklin Roosevelt, Teddy Roosevelt and Woodrow Wilson all have in common? They all accepted campaign contributions from Wall Street tycoons.
And, for those on that list who have already been president, all successfully imposed regulations on corporations anyway.
“There is a reason why these people are putting huge amounts of money into our political system,” said Sen. Bernie Sanders during last week’s Democratic debate. True enough. But the reasons why Democrats take it, and what that money buys, is a more complicated matter.
The modern Democratic Party, while never the party of Big Business, has long been financed by a combination of large and small donors. In 1912, Woodrow Wilson’s presidential campaign made a concerted push for small donors, attracting an impressive 90,000 contributors. But more than two-thirds of the money raised came from a handful of millionaires including Wall Streeters Henry Morgenthau, Jacob Schiff, and Bernard Baruch.
The Internet Age has dramatically changed fundraising in the ensuing 100 years—or has it? On one hand, then-Sen. Barack Obama was able to tap nearly 4 million individual donors in 2008. On the other, when it came to actual dollars donated, the share coming from small donors was a similar one-third. Not only did some of Obama’s top bundlers hail from the world of finance, but he also took in almost twice as much Wall Street money as his Republican opponent, John McCain.
Sanders doesn’t name-check Woodrow Wilson on the trail, perhaps because the Wilson administration prosecuted his socialist hero Eugene Debs and imprisoned him. Sanders does, however, lean heavily on the two Roosevelts in making the case for his platform. Yet both of them tapped the financial industry to make it to the White House.
Approximately 25 percent of FDR’s donations in 1932 came from Wall Street. For the progressive Republican Teddy Roosevelt, the extent of his reliance on Wall Street was kept secret during his successful 1904 campaign. It was only fully revealed in the midst of his 1912 third-party challenge with this scathing headline: “Wall Street Favored Roosevelt, Admits Monster 1904 Slush Fund.” J.P. Morgan himself ponied up $150,000. The Standard Oil monopoly gave $100,000 while the question of whether Roosevelt would bust them up was up in the air.
Why did these supposedly liberal champions take all this corporate money? Well, there is the little matter of winning. In the 2012 campaign, the first of the Citizens United era, Mitt Romney and his allied super PACs spent just over $1 billion trying to win the White House. How did Obama survive? By spending the same amount, making sure his message could not be drowned out. And as good as Obama’s small-donor base was, it couldn’t produce $1 billion by itself.
But is it a deal with the devil? What do these corporate donors ultimately get?
Sometimes nothing. Standard Oil, for example, still got busted up by Teddy Roosevelt. “We bought the son of a bitch, but he wouldn’t stay bought,” groused top donor and steel magnate Henry Frick.
More often, as Obama plainly said to anybody paying attention in his famous 2008 “Yes We Can” speech, “they get a seat at the table, they don't get to buy every chair.”
Democrats can’t solely cater to corporate interests; then their small donors would take a hike. But neither can Democrats dismiss their pleas and risk all of Corporate America unifying behind the Republicans. In the end, the interests of Democratic big donors and small donors have to be reconciled through compromises.
Obviously, there is constant tension inside this arranged marriage. But one cannot argue that it can’t produce meaningful legislation. Wilson and FDR ended a string of bank panics through the creation and expansion of the Federal Reserve, each president compromising by giving banking interests a role. Wilson advanced the antitrust cause with the Federal Trade Commission, though he had to initially limit its powers by subjecting its decisions to a judicial review. FDR conceded to Wall Street demands and created a Securities and Exchange Commission with latitude for regulators instead of rigid rules.
Similarly, Obama’s Dodd-Frank Wall Street reform delegates to regulators the tools to prevent massive bank failures, instead of writing into the law specific limits on bank size. And while Bill and Hillary Clinton lost their bitter battle with the health insurance and drug lobbies, Obama passed Obamacare by working with them, shelving antagonistic proposals pushed by the left like a “public health insurance option.”
Democratic voters can look at the past history two ways. Those who are satisfied with the types of reforms that have been produced would conclude the pursuit of corporate campaign cash is a manageable political reality – you need the money to win and compromises are inevitable. But if you see the above as proof that the system is woefully constrained by corporate influence, then it is cause to pursue a path of party donor purification.
Many on the left today want the end of direct banker influence on the Fed, stricter laws to prevent corporate “capture” of regulatory agencies and the replacement of private health insurance with a single government insurer. You can’t win those objectives under the current model. If you believe those objectives are critical, embracing Sanders’ anti-super PAC fundraising strategy is sensible.
But Sanders overstates the case when he says we have “a corrupt campaign finance system undermining American democracy, where billionaires, Wall Street, corporate America can contribute unlimited sums of money into super PACs and into candidates.” This presumes that what corporate America wants, corporate America always gets. Not so. There are too many donors with competing interests, not only between big and small, but between big and big.
Sanders stops short of directly accusing Clinton of being corrupt herself. When she charges him with engaging in “artful smear” by insinuation, he pivots to criticizing the system as corrupting to all. Whatever you think he’s trying to convey, the fact is that the mere taking of a campaign donation -- which literally every politician does -- is not corrupting. Yes, the donors want something in return. But donations are not contracts, and there’s no guarantee of return on investment. (In fact, both Obama and FDR saw their Wall Street donations disappear in their re-election campaigns.)
Clinton has a separate issue to grapple with in regards to her speaking fees paid by Goldman Sachs and others. These are not campaign contributions but private transactions, and large payouts rankle some voters as greedy and trading on past public service. Clinton is correct that other former public servants do it, but they usually don’t run for office again and so they avoid questions about conflicts of interest.
But the question whether she owes her past audiences something once back in office is an analogous to the campaign finance question. Past evidence suggests she doesn’t. Once you are president, you are accountable to an enormous range of constituencies. One seemingly fat check ends up being a drop in the bucket. Sometimes, you have to let your patrons down.
Sanders’ furious fundraising pace may leave the impression that the political argument for Democrats to solicit corporate donations has been debunked. But so far he has raised $75 million. Estimates for what will be needed to be viable in the general election now range between $1.5 and $2.5 billion. Clinton’s insistence of maintaining her donor network is not evidence of corruption; it’s evidence of competition.