When The Financial Sector Fuels Its Political Enemies

When it comes to Wall Street’s relationship with Washington, it often seems to be a case of keeping your friends close and your enemies closer. Texas senator and former Republican presidential candidate, Ted Cruz, ran his campaign as the anti-establishment outsider, claiming to be free of the influence of Wall Street. Last week, the Federal Election Commission voted unanimously that Cruz failed to disclose to voters $1.1 million in loans from Wall Street investment banks Citigroup Inc C and Goldman Sachs Group Inc GS.

Cruz accepting the donations did not violate any FEC rules, but candidates are required to disclose these donations to voters. Cruz faces a potential penalty for the violation.

Wall Street's Reach

It might come as no surprise that President Donald Trump, a wealthy New York real estate mogul, received campaign funding from Wall Street. But Cruz supporters might be surprised that the populist candidate who ranted against “crony capitalism” would turn to Goldman Sachs and Citigroup for financial support.

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However, no major candidate has been free of the influence of Wall Street in recent years. Trump and Democratic nominee Hillary Clinton both received millions of dollars of donations from the “securities & investment” industry. The same can be said of both former President Barack Obama and Mitt Romney in 2012.

A Seat At The Table

But why would Wall Street banks fund candidates such as Clinton, Obama and Cruz that take such a hard-lined public stance against the banks?

Wall Street may need the leverage with these candidates the most. Large donations from big banks may buy them a seat at the table in the event that the candidates follow through on their campaign promises to crack down on Wall Street. They may not see eye-to-eye on policy, but even the possibility to have a subtle influence on legislation is probably well worth a $1 million price tag for Citigroup and Goldman.

Despite helping fund Cruz’s campaign, big banks are likely thrilled that Trump won the election. Shares of Goldman and Citigroup are both up more than 17 percent since Election Day.