After weeks of worrying that Sen. Bernie Sanders would trounce his rivals on Super Tuesday and set the tone for a rancorous Democratic nomination, Michael Novogratz, the longtime trader and merchant banker, was newly motivated Wednesday morning.
Joe Biden, the former vice president and a moderate candidate with solid support on Wall Street, had notched an unexpectedly strong showing in the Super Tuesday primaries. Of course, Sanders could still win the nomination — but for Novogratz and others on Wall Street, Biden’s resurgence offered the opportunity to bankroll a Democrat they can get behind.
“There’s a lot of momentum on Biden’s side,” Novogratz said.
Already, one of his colleagues at Galaxy Digital, a cryptocurrency investment firm, was planning a Biden fundraiser. Novogratz himself was set to host a dinner Wednesday night to raise money for voter-registration efforts in swing states. Stocks, hammered in recent days over fears of the coronavirus — along with an undercurrent of worry about Sanders, according to some traders — were rallying as he spoke Wednesday morning. Between the easing of interest rates and the improving political picture, Novogratz said, “we’re getting some bounce.”
By the end of the day, the S&P 500 had risen more than 4%, bouncing back from a steep drop the day before, reflecting Wall Street’s relief about Biden’s success.
For moderates on Wall Street, this election season has been stressful. Accustomed to being courted by candidates seeking their financial support, bankers, investors, traders and executives from hedge funds and private equity firms have struggled to feel wanted in 2020. Sanders is an avowed democratic socialist who wants to tax billionaires — of which there are plenty on Wall Street — and has eschewed big donations. Michael R. Bloomberg, the former New York mayor and a multibillionaire respected by many financiers, didn’t want their money either. Pete Buttigieg, the former South Bend, Indiana, mayor and onetime McKinsey consultant whose common-sense centrism had intrigued others, had lost ground in recent weeks. And until this past weekend, Biden’s path to the Democratic nomination appeared tenuous.
Against that backdrop, Tuesday night’s results brought a surge of relief to many on Wall Street, who — fearful of the anti-capitalist sentiment espoused by Sanders and wary of another four years of a polarizing President Donald Trump — had essentially sidelined themselves from political activism. Now, with Biden’s victories presenting him as an effective political foil for Sanders, executives who had shrugged off the race are racing to support a candidate whom they believe can defend the social policies they are committed to without upending the economy.
Tracy V. Maitland, the president of Advent Capital Management and a supporter of Biden’s, said he was fielding numerous calls and texts from elated friends on Wall Street and in the entertainment industry. “People think we’ve turned a corner,” he said.
Even Leon Cooperman, the billionaire who had been supporting Bloomberg until he dropped out, expressed some relief. “I’m happy to see the country is not inclined towards electing a communist or a socialist,” Cooperman said.
Their objections to Sanders, whose signature policy was a universal, government-sponsored health care plan called Medicare for All, were reactions to both his style and his substance. His harsh talk — that aspects of the deceased Cuban dictator Fidel Castro’s regime were admirable, and that billionaires shouldn’t exist — unsettled many. And his embrace of expensive, big-government social programs like health care and college-debt forgiveness, combined with new wealth taxes and a desire to more aggressively regulate lending and banking, felt to many Wall Streeters like an assault on their way of life.
“I don’t like assassination by categorization,” Lloyd C. Blankfein, the former chief executive of Goldman Sachs, said of Sanders in a recent interview with The Financial Times. Other finance executives, who felt similarly but were reluctant to go public with their own views for fear of alienating clients or employees, said they were relieved Blankfein spoke up.
Many Wall Street executives don’t think Sanders’ policies are sound. “Canceling all college debt will help relatively rich and high-earning university graduates, versus the money coming out of the pocket of everyone else, including those who never went to university and therefore earn less,” Jennifer Fan, a former hedge fund manager who now invests her own money, said of Sanders’ policies. “The ideas are just not good, the consequences aren’t well thought out.”
By contrast, Trump’s economic policies, which have rolled back regulations, slashed taxes and focused on job creation, have favored corporations and coincided with a booming economy. Yet many Wall Street moderates are loath to support him, too.
The president’s tough immigration stance has rattled bankers and traders, many of whom travel widely and depend greatly on foreign-born employees to bolster their ranks. His apathy toward climate change, whose effects are increasingly driving investing and spending decisions, has concerned many. And even in an industry once known for its boorish behavior and treatment of women, Trump’s mean-spirited rants toward the Federal Reserve chair, the late Sen. John McCain, and scores of other prominent public figures have landed badly.
Still, Wall Street’s embrace of Biden could have downsides for the candidate. Hillary Clinton took in millions of dollars in campaign contributions from bankers and hedge fund managers. But during the 2016 election cycle, her private speeches to Goldman Sachs, including a remark that blaming the global banking system for the financial crisis was an “oversimplification,” drew scathing attacks from both Sanders and Trump, who argued separately that she was too beholden to Wall Street. Mitt Romney, who spent decades as a private-equity executive at Bain Capital before running for president in 2012, was attacked for the debt and layoffs his firm imposed on its investment companies during his tenure there.
Biden had already received Wall Street support early in the primary season. Both Jonathan Gray, the president of Blackstone, and Marc Lasry, the investor and big Democratic donor, co-hosted fundraisers for Biden in New York on Feb. 13. And Biden has taken in donations from the hedge fund manager Seth Klarman, Maitland and Stephen Scherr, the chief financial officer of Goldman Sachs.
Yet, on the campaign stump, Biden has invoked some of the same anti-elitist rhetoric that Sanders and Sen. Elizabeth Warren have used to rile up Democratic voters. Speaking to a crowd in Los Angeles late Tuesday evening, as key Super Tuesday victories rolled in, Biden said, “Wall Street didn’t build this country, you built this country.” In his campaign literature, he has bemoaned the financial industry’s putting profits over workers and the widening wealth gap in America.
The policy implications of a Biden administration for financial executives are not entirely clear. Biden has said he will shore up the Affordable Care Act, the landmark health-insurance reform act he helped enact during the Obama administration, which would presumably preserve the private-insurance system while enhancing government-subsidized coverage. He says he will reverse the Trump tax breaks and raise taxes on investment gains. Like Sanders, he has advocated for a $15 minimum wage.
But he lacks the sort of detailed policy papers that Warren, a perennial critic of Wall Street, has generated, and his message is more focused on hope and solidarity than it is on attacking the current economic infrastructure.
Given all that, Cooperman said he would wait to hear more from Biden before committing to support him. “I’d like to see, hear more about what he’s got to say,” he said. But after watching the candidate surge past Sanders on Tuesday, he added, “hopefully the left wing of the Democratic Party understands they’ll get murdered if they go with a left-wing candidate.”