The financial sector is the largest political donor to American politics, but the opinions expressed within it are not always what you think.
Open Secrets, which tracks money in politics, defines the financial sector as insurance companies, real estate companies, commercial/custodian banks, and investment/securities companies. It is, reports OpenSecrets, “by far the largest source of campaign contributions to federal candidates and parties.”
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This has been true for decades. In nearly every election of the 21st century, finance has dominated campaigning and political contributions. The only exception came in 2020, when generalist professionals as a whole narrowly edged out finance.
The result ? When you invest, pay insurance premiums or even make a deposit, your money can be used to help someone get elected. So there are a few things you should probably know.
For more information on managing your money responsibly, consider working with a financial advisor.
Financial institutions give huge sums
In 2010, the Supreme Court issued a decision titled United Citizens. That ruling ruled that spending money for an election constitutes political speech, which the government cannot limit or regulate under the First Amendment.
Rules regarding direct campaign contributions, that is, money given directly to a candidate or their campaign, remained in place. However, it is unconstitutional to limit the money donors spend independently on advertising, parties, or movements.
This move increased US political spending by several orders of magnitude. For example, in 2006, donors spent less than $5 million on so-called “black money” spending, campaign spending whose source is kept secret. In 2012, the election immediately following United Citizensthat figure has grown to more than $300 million.
The financial sector is no exception.
Between the midterm elections of 2010 and those of 2018, campaign spending by the financial sector more than doubled, from less than $400 million to more than $900 million.
In this year’s election, financial firms spent more than $1.3 billion on federal elections, half a billion of which went directly to candidates and political parties. That eclipses the second-largest individual industry, technology and communications, which donates a combined $289 million.
Financial institutions don’t always give what you expect
Historically, the financial industry has strongly supported conservative Republican candidates. As OpenSecrets writes, financial firms “distributed generous sums to both parties until 2010, when donations began to heavily bias Republicans, likely reflecting the financial industry’s interest in overturning regulation. of the Dodd-Frank Act, implemented to protect consumers from predatory lending practices and risky financial industry decisions.
Contributions from the 1990s support this analysis, with financial firms having a strong Republican leaning during the deregulation push of 1996 and 1998.
However, this trend has started to break. With every election beginning in 2016, financial firms began to divert their support from Republican candidates and conservative causes.
In the 2022 elections, the trend has reversed. Financial spending now narrowly favors Democrats and liberal causes, according to OpenSecrets. While about 48.4% of its spending goes to right-wing politics, about 51.3% of all financial sector spending now goes to left-wing politics.
Given the force with which Republican policies tend to favor the interests of the financial sector, this is an outcome that many voters may not expect.
Financial institutions are committed
Unlike many companies, financial companies tend to be politically engaged.
Historically, many companies have tended to split their campaign contributions between Republicans and Democrats. While corporations have a specific interest in pushing for certain policies, their greatest interest has always been in building relationships with incumbent politicians, regardless of who wins the election.
However, when it comes to the financial industry, most companies pick sides. Of the top 20 donors alone, only five split their donations between Democratic and Republican-leaning causes. Others donate most or all of their money to a specific party.
Blockchain-based company FTX.US, for example, has donated around 72% of its money to left-wing causes. At the same time, the hedge fund Citadel, LLC spent almost all of its money on right-wing elections.
The bottom line is that in 2022, financial companies seem to be supporting specific results. Rather than trying to buy general influence among politicians, companies seem to be trying to stimulate specific policies and policies that they would like to see succeed.
Donations from financial institutions reflect personalities
Choose the pattern:
- Soros fund management: Dem – 100% Rep – 0%
- Citadel, LLC: Dem – 0.9% Rep – 99.1%
- Thiel Capital: Dem – 0% Rep – 100%
- Bloomberg LP: Dem – 86.2% Rep. – 13.8%
- Elliott Management: Dem – 11.4% Rep. – 88.1%
- Ryan Specialty Group: Dem – 15.5% Rep – 84.5%
They are not only some of the most unique donors among financial companies, but they are also personality driven organizations.
When it comes to financial companies, donations often reflect the personality of the investors who run these companies. George Soros, for example, is a well-known advocate of liberal causes. As a result, his investment company fully supports Democrats and related issues. Peter Thiel is also engaged in conservative politics. His cabinet exclusively supports Republicans and related issues.
Within finance, investment firms dominate the list of big donors. These firms are themselves often dominated by extraordinary personalities, a reality that goes from their business models to their policies.
You rarely need to worry about it
As a consumer, you generally don’t have to worry about how your money is spent.
Among the major donors in the financial sector, very few are consumer-focused. Companies like Soros Fund Management, Citadel, LLC, and the Blackstone Group rarely manage private individuals’ affairs. Even major donors like Susquehanna International Group are business-to-business organizations.
A handful of companies are consumer-focused or operate in related industries, such as the National Association of Realtors and the Charles Schwab Group. However, they constitute the significant minority of donors, both in number of companies and in volume of donations.
Instead, the reality of this industry is that companies that give big money tend to do business with big money. As an individual consumer, your insurance company and bank almost certainly give money to politicians, but they’re probably not the biggest fish.
In this election, financial companies dominate political donations and spending. The next biggest donors aren’t even close.
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