By Karey Wutkowski - Analysis
WASHINGTON (Reuters) - The Obama administration’s Wall Street bashing fell flat among voters in Massachusetts, but that doesn’t mean Democrats have ended their anti-bank rhetoric.
Major U.S. banks, which returned to sizable profits and lavish bonuses just months after taxpayers bailed out the financial system, represent a convenient target for politicians to score points with voters.
“It is too easy and ripe and necessary a target for the Obama White House because they’ve been labeled as protecting the banks ... during the whole first year of their administration,” said Ethan Siegal, an analyst with the Washington Exchange, a private firms that tracks Congress and the White House for institutional investors.
In the past week, however, criticizing Wall Street fat cats has not translated into wins for Obama.
Massachusetts voters stripped the Democratic party of a crucial Senate seat on Tuesday, handing a surprise victory to Republican Scott Brown, a candidate Obama had painted as a friend of the banks.
“We asked Martha’s opponent, what’s he going to do, and he decided to park his truck on Wall Street,” Obama said Sunday at a campaign rally for Democrat Martha Coakley.
“Let me be clear: Bankers don’t need another vote in the United States Senate. They’ve got plenty.”
Obama separately last week hit back at banks by proposing a tax that would reimburse taxpayers for losses from the multibillion-dollar financial bailout.
A good chunk of the losses, however, is expected to come from the Detroit automakers and housing financing entities Fannie Mae and Freddie Mac -- not from big banks. And bankers are quick to point out that the Treasury Department’s capital investments in banks last year have netted taxpayers a hefty profit.
Warren Buffett, an Obama supporter and one of the most closely followed investors in the world, said on Wednesday that the bank tax “just doesn’t make any sense to me.”
U.S. tax policy should not be used to grab headlines or as a form of vengeance, Buffett said in an interview with CNBC television. And banks should not have to cover taxpayer losses from other bailed-out companies, he said.
A financial industry source said on Wednesday that much of Obama’s criticism of the banks is misplaced.
The source, speaking anonymously because of the sensitivity of the topic, said the industry has been working productively with policymakers on regulatory reform, and has made great progress in cleaning up their balance sheets, deleveraging, reforming compensation practices and improving risk management and corporate governance.
But he said that message does not play as well as the attacks.
“There is a lot of anger at Wall Street and at the financial sector still in the electorate, regardless of improvements and reforms embraced by the industry,” he said.
Although the rhetoric may not go away, it could be dialed back, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.
Morici said Obama and Democratic lawmakers will continue to rail against Wall Street for a while, but the theme may lose steam as the public turns its interest elsewhere.
“People are more upset about other things like co-pays on insurance,” he said.
Editing by Steve Orlofsky