Finance Industry Makes Up Nearly Half of pro-Romney Super PAC’s Donations

Billionaire hedge fund pioneer Julian Robertson has made a dramatic contribution to the Republican presidential campaign of Mitt Romney, thanks to the Supreme Court’s Citizens United decision. Robertson gave $1.25 million to Restore Our Future, a super PAC that has underwritten a relentless advertising campaign attacking Romney’s opponents. This is 500 times the contribution he made in June. 

An analysis of Federal Election Commission data by the Center for Public Integrity has revealed that of the $43.2 million raised by the attack PAC, $20.5 million, or 48 percent, came from finance industry donors. Private equity firms and hedge funds made up the majority of this, with $13.5 million, while investment banks and other asset managers, as well as non-bank lenders, contributed the rest. 

Restore Our Future is the most well-funded of the super PACs backing presidential candidates in the 2012 election. It closed out February with $10.5 million cash on hand, more than Romney’s campaign, according to FEC records. Romney, a former private equity executive, has been vocal in his opposition to closing the tax loophole that has made private equity and hedge fund managers wealthy. 

The average contribution to the super PAC was a little more than $83,000, with the exception of homebuilder and long-time Republican donor Bob Perry, who gave $3 million in February, bringing his total contributions to $4 million.

High court changes the game

The landmark 2010 Supreme Court ruling in Citizens United v. FEC paved the way for the emergence of Super PACs, which can accept unlimited donations from corporations, labor unions and wealthy individuals to pay for campaign-related expenses, provided that there is no coordination with candidates. 

Hedge funds and private equity companies, both largely unregulated, are often the investment vehicles of choice for high-value investors such as wealthy individuals, private banks, pensions, corporate treasuries and endowments. 

The securities and investment industry, represented by trade associations, has long shared Mitt Romney’s view that the Dodd-Frank Wall Street Reform and Consumer Protection Act should be repealed. Additionally, the industry is keen to preserve the current taxation of carried interest, a major source of income for Romney and other investment managers, at the capital-gains rate of 15%. 

Romney’s campaign has been the biggest beneficiary of donations from the securities and investment industry, having received $6.8 million compared to President Barack Obama’s $2.3 million and the pro-Obama super PAC Priorities USA Action’s $175,000. Goldman Sachs employees have been particularly generous, having donated $670,000 to the super PAC and over $535,000 to the Romney campaign itself. 

Neither the Romney campaign nor Restore Our Future responded to requests for comment on this story.

Top donors 

Edward Conard, former managing director of Bain Capital, initially made a $1 million donation under the name “W Spann LLC”. After numerous media outlets raised questions about the legitimacy of the donation, Conard came forward. Current and former executives at Bain Capital and their families gave at least $3.1 million to Restore Our Future, including two households that contributed $1 million or more. 

Paul Singer, founder of Elliott Management, donated $1 million. His net worth is estimated at $1 billion, and he made some of his fortune by purchasing debts owed by countries including Peru and the Republic of the Congo and suing them for payment. Despite being a fiscal conservative, Singer is an outspoken critic of the Federal Reserve and supports gay rights. 

John Paulson, founder of Paulson & Co., made an early million-dollar donation. He made $15 billion during the recession by short-selling subprime mortgages. Robert Mercer, president and CEO of Renaissance Technologies, donated $1 million. He is a frequent contributor to Republican candidates and causes, though he has also donated to Democratic candidates. All three donors could not be reached for comment.

Legislative priorities

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires investment advisers managing assets worth over $150 million to register with the Securities and Exchange Commission (SEC). These firms must provide information on their organizational structure, the individuals in key roles, the types of clients they advise, and any conflicts of interest. Registration also opens the possibility of surprise inspections by the SEC. 

The provisions of Dodd-Frank have been met with opposition from investment managers, according to Lynn Stout, a professor of corporate law at Cornell University. “Many people have doubts as to whether this sector of the economy is really socially beneficial,” she said. 

The issue of carried interest has been brought to the forefront by Mitt Romney’s tax returns, which revealed that he paid a tax rate of 14 percent in 2010 and 2011. Carried interest is the profits generated from investments managed by hedge fund and private equity managers, which are considered “capital gains” and are taxed at a maximum rate of 15 percent. If the income were taxed the same as earnings, the rate could be as high as 35 percent. 

President Barack Obama’s new corporate tax plan, unveiled in February of this year, proposed to treat carried interest as earned income. This has been echoed in proposals from both houses of Congress, put forward by brothers Senator Carl Levin and Representative Sander Levin. 

Hedge funds and private equity groups have lobbied to keep this change from happening. In 2011, the Managed Funds Association, the Private Equity Growth Capital Council, and the National Venture Capital Association spent a combined $8.7 million on lobbying. Douglas Lowenstein, president of the Private Equity Growth Capital Council, described the proposed change as a “punitive 157 percent tax hike [that] will hurt those companies that are most desperately in need of capital to sustain or create jobs and drive growth.”

Payday lenders for Romney?

Restore Our Future, a Super PAC, has benefited from the generosity of non-bank lenders such as payday loan and title loan companies, as well as check cashing services. These lenders are now subject to federal regulation under the Dodd-Frank Act, and are not pleased with the oversight of the Consumer Financial Protection Bureau (CFPB). Rod Aycox, of Loan Max, and his title loan company Select Management Resources, donated $200,000 to the Super PAC. Las Vegas-based REBS Inc., whose president is James Marchesi, founder and president of Check City, a chain of payday lenders, gave $25,000. Allan Jones, CEO of one of the country’s largest payday lenders, Check into Cash Inc., donated $35,000. Other payday lenders that gave money to Restore Our Future include Community Choice Financial, QC Holdings, Amscot Corp. and Express Financial Services. RTTTA LLC, linked to J. Todd Rawle, and Katsam LLC, linked to Moneytree founders Dennis and David Bassford, also donated to the Super PAC. 

The payday loan industry, which offers short-term loans at high interest rates, is opposed to further regulation. The Financial Service Centers of America (FiSCA), a national trade association for non-bank entities, argues that such regulation could reduce or eliminate access to small dollar credit for Americans. Donors to Restore Our Future may be hoping for special treatment from a Romney presidency, but given the candidate’s support for the industry, this may not be the case. According to Cornell professor Richard Stout, “They view him as far and away the candidate that’s most likely to be sympathetic to preserving business as usual in the financial sector.”

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