Republicans on Wall Street: We’re so done with you

Caught in the middle are Republican committee leaders who are under pressure from their base to adopt a populist tact toward big business.

“My members intend to send a message that you cannot pander to a far-left agenda and that Republicans continue to fight the good fight in the name of free markets and a market that benefits everyone. these companies,” the rep said. Patrick McHenry (RN.C.), who is set to chair the House Financial Services Committee, said in an interview. “It’s a complicated factor for sure.”

The pledges mark a stunning shift by the traditional big business party. While Republicans would no doubt use their majority in the House to push back against the Biden administration’s proposals to regulate finances, GOP lawmakers are growing frustrated with Wall Street giants who have taken social stances. contrary to the conservative movement.

This shift leaves big banks and investment firms with a dwindling number of reliable allies in Washington. The far left and far right are eager to fire on the industry, placing it under constant political siege.

The companies and their sprawling trade groups in Washington — several of whom were contacted for this article — have yet to mount a public defense against the coming scrutiny, in part for fear of reprisals from right and left. The American Chamber of Commerce, the Business Roundtable and the Bank Policy Institute are among the groups that declined to comment.

“There’s a complete lack of built-in capability or skills to engage in this fight,” said American Compass executive director Oren Cass, who served as chief domestic policy officer for Sen. Mitt Romney2012 presidential campaign. “On the Wall Street side, there’s just been an assumption that you can run and hide behind these politicians who are going to stand up and say, ‘No, no, leave them alone and it will be better for you. everybody.’ It no longer flies.

Antagonism toward big banks and investment managers has been building on the right for years as companies attempted to distance themselves from gun financing in the wake of mass shootings and embraced sweeping pledges to help fight climate change. Former President Donald Trump embraced an anti-Wall Street message in the final days of his 2016 presidential race in an effort to appeal to working-class voters before populating his administration with veteran financiers like the former president of Goldman Sachs, Gary Cohn.

The conflict intensified in the Biden era as corporations recalibrated for regulation by Democrats and stepped up the environmental, social and governance (ESG) activities sought by sustainability investors — efforts that were often run by blue state pension funds. Another trigger was the decision by some companies to suspend campaign contributions to Republicans who contested the 2020 election results.

representing Blaine Luetkemeyer (R-Mo.), who will likely serve as chairman of the House financial services subcommittee, said Republicans need to empower leaders and boards to “push off some of this woke stuff and the stuff.” of social justice so that they can start doing business again instead of being social laboratories.

“The financial services industry will certainly face a more hostile GOP majority in 2023 than in previous years,” said Cliff Roberti, a former Republican House financial services aide who now represents corporate clients as a co- founder of Federal Hall Policy Advisors. “Companies will need to demonstrate effectively that they are not politicizing decision-making and that they are acting in a manner consistent with the interests of investors and companies that need access to capital.”

representing Andy Barre (R-Ky.), another likely chair of the financial services subcommittee, named asset management giants BlackRock, State Street, Vanguard, Invesco and Fidelity as “big companies” that should “stop this nonsense to politicize capital allocation via ESG”. Barr said he views the trend in ESG investing as “the weaponization of financial regulation designed to discriminate against American energy companies.”

“We want these mutual fund companies, these ETF companies, the members of the [Investment Company Institute trade group] come before Congress and tell us how they’re going to change course and go back to prioritizing investor returns, instead of promoting this ESG fraud,” he said in an interview.

The companies named by Barr declined or did not respond to requests for comment. Amid scrutiny of their influence on US companies, BlackRock and Vanguard have announced plans to give their clients the ability to vote on the policies of the companies they invest in.

A spokesperson for the Investment Company Institute, which represents companies, said the group is working with ‘both parties in Congress to represent the long-term financial interests’ of investors and ‘will continue our bipartisan approach’ to legislation. .

Advocates of sustainable investment practices say companies are driven by their own business interests, including responding to the impending impact of climate change.

Ceres chief executive Steven Rothstein, whose sustainability association counts JPMorgan Chase and Bank of America among its members, said “market participants – for business, not political reasons – have identified that the climate is an increasing risk”.

“The climate crisis is a significant business risk,” he said. “To prevent this from having huge material impacts on their business [they need] to incorporate it into their decision-making.

representing Sean Castenan Illinois Democrat on the financial services panel, said capital was moving away from fossil fuels toward clean energy “for purely business reasons.”

“You have markets sitting there saying, I see what consumers are demanding, I see what the trends are globally, I want to move my capital to an industry that can invest capital and provide stable returns “, did he declare. “The crazy wing of the Republican Party sees all this and says, ‘If we just call it woke capitalism, maybe we can scare the financial institutions into making economic decisions that will redirect money to our districts in the world. Congress.'”

While facing punches from the right, the banks have resisted attempts by Biden regulators to impose environmental and social guidelines on the industry, including climate risk disclosure.

The American Bankers Association, in a June letter to the Federal Reserve, Treasury Department and other agencies, said banks should generally be free to do or not do business with any entity of their choice, as long as it is legal and does not violate anti-discrimination laws.

“This free market approach has given this nation the strongest and most resilient financial system in the world, and the growing efforts of policymakers from all political backgrounds to intervene in the intermediation of capital risks undermining this system” , the ABA and said state banking associations.

Retired Senator Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee and former chairman of the free-market advocacy group Club for Growth, urges his colleagues to keep the pressure on the financial industry’s environmental and social investment activities. Toomey researched information on the operations of ESG rating agencies.

“Many liberal politicians are pressuring banks to use both their balance sheets and influence to address issues unrelated to the banking industry, such as global warming, gun control, voters and abortion,” Toomey said in a statement. “Several large banks have been all too willing to acquiesce to these demands by embracing a liberal ESG agenda that operates outside of representative democracy.”

Sen. Tim Scott of South Carolina, who is set to be the next Republican top Senate banker, has begun raising concerns with financial firms about their practices. He berated bank CEOs last year after their companies opposed a Georgia voting reform law they said was discriminatory. Last month, he signed a letter demanding that PayPal explain a withdrawn policy that would have punished users for proliferating misinformation.

Another prime target for Republicans will be the financial sector’s ties to China.

Luetkemeyer floated the idea of ​​expelling Chinese companies from US stock exchanges and limiting investment in China – “our nemesis”.

“What we need to do in our committee is raise awareness,” he told POLITICO. “These people intend to hurt us and you are helping them by continuing to invest in their country and giving them the capital they need to develop their economy. You have to stop doing this.

Declan Harty contributed to this report.

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