Wall Street Puts Money Behind Obama

WASHINGTON -- Wall Street is putting its money behind Democrat Barack Obama for president, despite worries that his administration would raise taxes and take a tougher line on trade and regulation.

The signs Wall Street reads point to Democrats prevailing in the November presidential and general election as voters punish the incumbent Republican Party for a flagging economy and lengthy Iraq war. And the fact that Obama began raking in a bigger share of the cash as his campaign picked up steam suggests that investors simply want to back the eventual winner.

Senator Obama, who captured the Democratic nomination Tuesday after a lengthy primary battle against Senator Hillary Clinton, has received $7.9 million in contributions from the securities and investment industries, according to the Center for Responsive Politics. His opponent, Republican Senator John McCain, banked a little under $4.2 million.

Overall, Democrats garnered 57 percent of the contributions from the securities and investment industry. If that trend continued through November, it would mark the first time since 1994 that they have drawn more Wall Street cash than Republicans in a presidential election year, according to the data complied by the Center for Responsive Politics.

Investing is all about betting on the future, and presidential elections are no exception, with traders giving Obama an edge in November. Dublin-based Intrade, a web site where contracts tied to real world events are bought and sold, gives Obama a healthy advantage over McCain. That also helps explain why Wall Street cash is piling up in his coffers, even though many of his policy positions are not popular among big investors.

The Securities Industry and Financial Markets Association, which represents more than 650 securities firms, banks and asset managers, favors making permanent the tax cuts implemented during President George W. Bush's tenure. Obama has vowed to let them expire.

If Obama picked Clinton as his running mate, that might ease Wall Street's fears that his administration would hike capital gains and dividend taxes, said Michael Darda, chief economist at MKM Partners in Connecticut. Not only has Clinton proposed less aggressive increases in those taxes, but when her husband, Bill Clinton, was president, he lowered them, Darda said. "If those taxes go up sharply, that would be a significant blow not only to the stock market but to the economy and productivity and living standards. It would be a real mistake, and hopefully Obama will change his view on it," he said.

The other hot-button issue is trade. SIFMA supports passing free trade agreements with countries including South Korea, something Obama has opposed. Obama and Clinton sparred over who would be tougher on trade, and both said they would renegotiate the North American Free Trade Agreement, or NAFTA, to add more labor protections.

Andrew Busch, a global foreign-exchange strategist with BMO Capital Markets in Chicago, said the campaign rhetoric about trade could cool now that the long primary season is over.

Rewriting NAFTA "would be a disaster," Busch said. "We can't go back to our trade partners and say we don't like this or that aspect of it. Our trade partners will have a few things to say about what they don't like."