In the last presidential election, Wall Street donors outsourced to Joe Biden, contributing more than $74 million to his 2020 campaign, according to the Center for Responsive Politics data.
This time, Democrat-leaning banks have their hands tied because of the choice of Vice President Kamala Harris, Minnesota governor Tim Walz. Financial services companies risk the wrath of the Securities and Exchange Commission if their employees make donations to state or local officials like Walz. Granting the campaign would violate the regulator’s “pay-to-play” rule, which prohibits firms from trying to sway politicians for benefits such as controlling their state’s pension fund.
To comply with this law, Citigroup told US employees on August 6 that they must seek prior approval to donate to the Harris-Walz campaign, according to a memo seen by Business Insider. These restrictions apply to staff members in all but one of its five business divisions, including investment banking and wealth management. The US consumer banking sector is exempt.
Citi employees are not required to obtain prior approval to donate to former President Donald Trump’s campaign unless they are designated as a “Municipal Finance Professional” or “Covered Associate” or as part of a “sector-facing business” community.” Those employees are also required to obtain permission to donate to the Harris-Walz campaign.
The SEC’s “pay to play” rule, adopted in 2010, also applies to Citi’s peers, such as JPMorgan, Wells Fargo, and Bank of America, which did not respond to a request for comment by press time. . It is not clear whether those banks are asking employees for pre-approval or blocking contributions.
Citi implemented a similar strategy in 2016 when Trump picked then-Indiana governor Mike Pence as his running mate.
The policies may seem strict, but even small contributions can produce serious penalties. In 2017, Pershing Square paid a $75,000 settlement four years after the then-analyst gave $500 to a Massachusetts gubernatorial candidate. The state pension plan was an investor in Pershing Square at the time. Pershing was unaware of the donation, a spokesman said at the time, and the auditor was able to recover his money.
The SEC prohibits banks from receiving payment for government consulting services for two years after contributions to a state or local official. This applies to contributions over $350 made by employees first they entered the bank. JPMorgan agreed to advise a Tallahassee, Florida pension fund for two years for free after hiring an employee who previously donated to the mayor’s campaign.
“Organizing one campaign over another, for whatever reason — and there are rules put in place — seems like politics,” Professor Patricia Crouse told Business Insider.
Crouse, who teaches political science at the University of New Haven, said the policies are demoralizing workers.
“You want to be able to support your constituents,” he said. And if you can’t do that, I think it makes you feel out of place.
It is possible to circumvent the “pay to play” rule by donating to PACs or Super PACs that are not directly related to the candidate in question.
In 2022, former SEC Commissioner Hester Peirce criticized the payout rule after the SEC charged four financial advisers with one-time, small contributions, calling it “a tool most stable.”
“The Affordable Care Act, while well-intentioned, imposes unique, disproportionate costs on individuals by impeding their ability to participate in political affairs.” he wrote in a statement. “A government agency’s investigation into the motives of a person exercising their right to participate in political activity is not free of anyone involved and can itself become political.”
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