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Democratic presidential candidate Sen. Elizabeth Warren speaks during the Iowa Democratic Party's Liberty and Justice Celebration on Nov. 1, 2019, in Des Moines, Iowa.

The Associated Press

Julia Roberts was making the rounds at Blackstone, and no one at the giant private equity firm was particularly happy to see her.

In mid-July, a video featuring a clip of Roberts in the movie Pretty Woman ping-ponged through inboxes of Blackstone employees. The video, produced by Sen. Elizabeth Warren’s office to promote a legislative campaign, showed a scene in a hotel suite where Richard Gere, playing a suave investor, admits to a young Roberts that his work was akin to stealing cars and then selling off the parts.

Warren’s tagline: “Stop Wall Street looting.”

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The pitch went largely unnoticed publicly. But at Blackstone, a titan of Wall Street, the video was received with a mix of frustration and incredulity, people who work at the firm said.

They aren’t the only ones: From corporate boardrooms to breakfast meetings, investor conferences to charity galas, Warren’s rise in the Democratic primary polls is rattling bankers, investors and their affluent clients, who see in the Massachusetts senator a formidable opponent who could damage not only their industry but their way of life.

It’s a role that Warren unabashedly embraces, as an increasing number of voters as well as a few veterans of the finance industry see her as the policy maker who can address the growing wealth gap in the United States and take on corruption and excess in the business world.

Warren has made battling corporate greed and corruption a central theme of her fiercely populist campaign, mixing anti-elitist oratory with policy plans calling for sweeping new regulations. Friday morning she released an ambitious proposal to pay for her “Medicare for All” program, with provisions directly affecting Wall Street: aggressive new taxes on billionaires, an additional tax on financial transactions like stock trades and annual investment gains taxes for the wealthiest households.

Just hours later she told an audience in Iowa: “Our democracy has been hijacked by the rich and the powerful.”

Interviews with more than two dozen hedge fund managers, private equity and bank officials, analysts and lobbyists made clear that Warren has stirred more alarm than any other Democratic candidate. (Sen. Bernie Sanders, who describes himself as a socialist, is also feared but is considered less likely to capture the nomination.)

Wall Street has long tried to influence U.S. politics and generally donated to both parties, though traditionally has been more aligned with Republicans. But while there’s no co-ordinated strategy, the industry is more or less united against Warren. With just months before the first voting begins, it is unleashing a barrage of public attacks, donating money to her rivals and scrambling to counter her blistering narrative about Wall Street.

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Attendees at a town hall-style campaign event for Sen. Elizabeth Warren at Iowa State University in Ames, Iowa, Oct. 21, 2019. With a populist message that promises to rein in corporate excess, Warren has been facing more hostility from the finance industry than any other candidate.

Demetrius Freeman/The New York Times News Service

“Everyone is nervous,” said Steven Rattner, a prominent Democratic donor who manages the wealth of Michael Bloomberg, the former New York City mayor. “What scares the hell out of me is the way she would fundamentally change our free-enterprise system.”

While even some of Warren’s detractors see her soak-the-rich approach as a winning issue in the Democratic primary, President Donald Trump and his team would undoubtedly try to weaponize it against her in a general election. Already, some Republicans are defining Warren as a veiled socialist who would disrupt the fragile economy with her sweeping plans.

As president, Warren would also confront a long list of powerful and well-funded opponents on Wall Street, potentially complicating her ability to enact her agenda. Her tightly organized campaign has no Wall Street liaison or circle of advisers drawn from the industry and has done little outreach to the finance world.

Yet even if Warren cannot get some of her more far-reaching proposals through Congress, finance executives fear that as president, she would appoint regulators who take a far stricter view of the industry.

Warren’s campaign declined to comment, pointing to her public remarks, in which she has welcomed doing battle with Wall Street.

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In recent weeks, Wall Street’s warning signals about Warren have begun exploding into the public, colouring analyst reports and earnings calls and echoing from the stages of industry conferences. Billionaire money manager Leon Cooperman castigated her in an open letter released Thursday, and on Friday, Goldman Sachs researchers suggested that tax increases proposed by Warren and others could lower corporate earnings by 11%.

Prominent money managers have predicted a double-digit decline in the stock market if Warren wins the presidency, a claim that some skeptics find hyperbolic. Some traders and investors have said, only half-kiddingly, that they’ll leave the country – or at least, relatively high-tax states like New York – to minimize the impact of what they view as punitive policies.

The wariness exists even in more friendly Democratic terrain. When prospective donors to the Black Economic Alliance, a non-partisan political action committee focused on bettering the economic lives of black Americans, gathered one evening last month, the conversation quickly turned into a debate over Warren, according to someone who attended.

Over dinner at Michael’s in Midtown Manhattan, some attendees suggested they would consider not voting in the general election if Warren won the nomination. They objected to her proposed “ultramillionaire tax,” a 2% annual tax on households worth $50 million to $1 billion that would constrain people’s ability to pass their wealth on to their children.

Warren’s many policy plans take aim not only at multimillionaire pocketbooks but also the financial responsibilities of banks and investment firms. Yet many Wall Street officials believe that Warren does not understand modern-day investing and lending, does not respect financial companies and is demonizing those who work in the markets.

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Mitch Draizen, a former fundraiser for Obama who made his money in the financial industry, said he would back Warren’s candidacy against Trump’s. But he is supporting former Vice President Joe Biden this time, worried about Warren’s disruptive approach. “She would be just as unpredictable and unproductive as Trump if she were to become president, and who needs that,” he said. “She’s getting a little carried away, and to me, it’s irresponsible.”

On the campaign trail, she has emphasized that she is pushing only for fairness and accountability. She said she believes in markets – as long as they have rules. And unlike Sanders, Warren has not argued that billionaires should not exist; she wants them to pay much higher taxes than they do now.

Local residents arrive to listen to Democratic presidential candidate Sen. Elizabeth Warren speak at a town hall meeting at Grinnell College, on Nov. 4, 2019, in Grinnell, Iowa.

Charlie Neibergall/The Associated Press

“Understand I’m not proposing this because I’m cranky,” she said at a stop in New Hampshire recently.

Yet it is also clear that Warren and her campaign see this fight as a political winner, one that can bolster her populist appeal. Indeed, a number of Democrats on Wall Street have dryly noted that every time their colleagues complain in the press, Warren picks up more votes in Iowa.

Even within the finance community, she has supporters – some of whom view Wall Street opposition as a thinly veiled attempt to fend off any policies that affect profits.

“The greed of Wall Street, of area code 212 types, has just gotten absolutely carried away, and it needs to be rolled back,” said Marc Cohodes, a long-time short-seller who bets against troubled companies. Of Warren, he said, “She would be great. I think she would be a breath of fresh air.”

Warren has already collected campaign donations from employees of JPMorgan Chase, Barclays, and the asset management firm Point72, among others.

Wall Street’s allergy to regulation is nothing new. Throughout the 1990s and 2000s, despite the industry’s rampant risk-taking, financial institutions successfully beat back proposed curbs on their leverage, lending and use of exotic financial instruments. Even in the aftermath of the recession, banks and financial firms battled the implementation of the 2010 Dodd-Frank Act, which imposed broad restrictions on banks and trading. Now, in ways big and small, Wall Street has begun bracing for a possible Warren administration.

Some money managers and traders are testing something they call the “Warren trade”: either a bet that U.S. stocks will fall next November on the news of her victory or that certain stocks in areas she plans to regulate aggressively – like health care, energy and finance – will fall during the period between now and late 2020.

Private equity executives – who believe the Pretty Woman video gives an outdated and inaccurate view of their business – have also begun extolling the virtues of their activities, kicking off a kind of pre-emptive public relations effort. Their lobbying organization, the American Investment Council, is promoting the industry as a job creator in op-eds, interviews and a digital ad campaign. And Blackstone’s chief executive officer, Stephen Schwarzman, said recently that his firm had created 100,000 more jobs than it has cut in the past 15 years.

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Business executives are also donating to Warren’s more moderate challengers, hoping to propel candidates with less transformative visions for revamping the economy.

Of the roughly 1,400 biggest donors to Hillary Clinton’s 2016 campaign, just under 2% have given the maximum contribution to Warren, according to a New York Times analysis. That’s a far lower percentage than those who gave to rivals like Biden.

Warren also ranks well down the list in money raised from individual donors in the finance industry. She has raised about $330,000, according to year-to-date figures compiled by the Center for Responsive Politics, far less than Mayor Pete Buttigieg, who leads the Democrats with nearly $1.3 million, and behind others who are languishing near the bottom of the polls. (At about $1.5 million, Trump is the biggest beneficiary of finance-industry donations.)

In her presidential campaign, Warren has eschewed donations from corporate PACs and bundlers, swearing off big fundraising events as she collects a flood of small donations. Last month, her campaign announced that it would no longer accept contributions of more than $200 from executives at big banks, hedge funds or private equity firms.

(For her Senate campaign, she did accept money from finance industry donors, some of which was transferred to her presidential effort.)

Warren’s Stop Wall Street Looting Act mandates that private equity firms guarantee the debt of any companies they buy, a move that would make their corporate investments far more risky and possibly dampen their ability to make profits for investors. She has also proposed reinstating the Glass-Steagall Act, the landmark legislation that separated commercial banking from investment banking for decades before its repeal in 1999.

The effect of such sweeping measures, some market participants said, could be profound.

“I am a fan of Elizabeth Warren, but electing her may be a case of ‘be careful what you wish for,’” said Jamie Lester, a former hedge fund analyst who now works as a consultant. “I don’t think she realizes how fragile our economy and financial system are, and she will be driving a bulldozer through them.”

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