President Barack Obama is trying to win back Wall Street executives and hedge fund managers.
In the 2008 election campaign, Obama enjoyed broad support from Wall Street. Even many executives who usually support Republican candidates were backing Obama against John McCain.
But since then, Obama has turned off many financial industry executives by labeling them "fat cats"—and, perhaps more importantly, by failing to bring about a more robust economic recovery. The businesses of many of Wall Street's biggest companies depend, in large part, on a growing economy.
Obama's supporters have organized a series of meetings with financial executives to try to repair the relationship, according to the New York Times. In March, the Democratic National Committee held a meeting with two dozen Wall Street executives in the Blue Room of the White House. A month ago, Obama's campaign manager organized back-to-back meetings with Wall Street executives, culminating in a meeting at the home of hedge fund manager Marc Lasry. Also, Obama will "return to New York this month to dine with bankers, hedge fund executives and private equity investors at the Upper East Side restaurant Daniel," the Times reports.
The reason for all this courting is something many on Wall Street understand: money. Obama doesn't need their votes, he's sure to win New York and Connecticut, where many of the executives live. He needs their campaign cash.
So what can Obama do to win back the Wall Street fat cats whose bank accounts he hopes will finance his campaign?
1. Suck Up To The "Fat Cats." The top guys on Wall Street are mostly motivated by the desire for prestige. They're already so wealthy that money is often just a way of keeping track of who is "winning." They don't want to be bashed as "fat cats" or blamed for a recession they believe is mostly the result of an irrational mania for housing rather than financial misdeeds. They see themselves as charitable on the individual level, and performing an economically crucial service on the professional level. Most of them believe that bashing Wall Street is economically destructive.
In short, Wall Street guys are a lot like politicians. The key to winning them over is simply to reflect their own self-images back at them. They'll believe that "Obama gets it" when believe Obama likes them and their business. Give a speech somewhere praising the charitable efforts of the guys. Maybe work the Robin Hood Foundation into a speech about education policy.
2. Play Good Cop, Bad Cop With Hedge Funds. The most loathed political proposal in the hedge fund community is ending their ability to classify gains as "carried interest," forcing them to pay taxes on the gains as if it were ordinary income rather than capital gains. This proposal, which has been floating around for years, would dramatically raise the tax liability of hedge fund managers. Worse, it would undermine the very structure of hedge fund organization and compensation, which was largely built around the idea that the gains of investment decisions of hedge fund managers should be treated like just like the investment gains of everyone else—as capital gains.
But the only way Obama can make this issue into a winner is to make the tax change a credible threat. He has to hint that Democratic senators are likely to back the carried interest tax increase—and then point out his leadership is the only way to prevent this change. In short, Obama needs to be the "good cop" who will resist the tax-hiking Democratic senator bad cops.
3. Seduce The Youngsters. The way to win over a lot of the wealthiest supporters is to win over their staffers. This may seem counter-intuitive to a Washington insider. But here's how things work on Wall Street: Many of the executives take their social and political cues from their younger colleagues. So the staffers are the influencers. This goes back to the prestige thing: the top guys want to be considered to be "with in" and "in the know." Just look: at the recent hedge fund-heavy Robin Hood charity gala, they had Lady Gaga perform. You want a hedge fund guy on your side, win over the investor relations or sales people or portfolio managers. There are the people he trusts the most.
4. Listen and (Pretend to) Learn. Guys running investment banks and hedge funds are under the impression they are incredibly cognitively gifted. It's immensely frustrating to them that politicians often seem oblivious to their intellectual superiority. Of course, to many in politics this just makes the financial types seem like arrogant gas bags. Well, whatever. You're going to have to ignore that impression, and at least pretend you are very open to their ideas. Put a couple of their suggested guys on your "National Financial Council." Grab a retiring executive or two for your administration. You don't have to come up with any actual policies so long as you can credibly fake an interest in their policy ideas.
5. Come up with a credible economic policy. Okay. I kind of lied.
While listening will help, it would be even better to come up with a real economic policy. This is the big "duh." Right now no one on Wall Street is confident that the country's economy will grow well in the second half of this year or the first half of 2012. They don't have any clue what the Obama administration intends to do about that.
Proposing temporary measures, such as an employer-side payroll tax break, is considered a joke.
Bonus suggestion: Drop by a party or two in the Hamptons this summer.
Avoid the nightclubs or major charity events, which are pretty much unbearable in any year but promise to be even worse this year.
Instead, stick to the private parties with 100 or fewer invited guests. This will go a long way to making people forget all those nasty "fat cat" remarks. Pretty soon, they'll be purring along to your ego stroking.
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