Why Wall Street picked Kamala Harris

0:09James, you're a deals reporter. How did you end up writing about politics all the time? I've been asking myself that question too. It all started about a month ago when I was in the office watching the debate. And as I was kind of witnessing the meltdown of Joe Biden against Trump, I started just texting my sources and people who I knew kind of were generally pro-Biden. Wall Street type. Yeah, Wall Street guys. And I was like asking, so do you still think this guy can win? And it was like, shock. And I started feeding a couple of lines to her blog. And from that point onwards, I realized that all the people I write about who talk to me about M &A are actually pulling a lot of strings when it comes to politics.

1:01It's a horrifying truth about America that money and politics are often the same thing. It couldn't be more true. This is Unhedged, the markets and finance podcast from the FT and Pushkin. I'm Rob Armstrong, coming to you from New York City. My interlocutor today is James Fontanella-Khan, who is our U.S. deals reporter and now our junior politics reporter. James, welcome to the show. Thanks for having me again. Right. So we had the mortifying debate performance. What did Wall Street do next in response to that disaster? A lot of Wall Street guys are historically Democrats. I mean, they're kind of very conservative on finance and economic matters, but on social matters, they're more kind of blue.

1:54Yeah. And so immediately there was a sense of like, we got to remove this guy. Get rid of Biden. He's got to go. And Harris wasn't an obvious kind of pick for anybody, although she has always had a fairly tight report with people on Wall Street. Not very advertised, but these, again, are the people I talk to quite regularly. The founders of some of the larger boutique investment banks think about Evercore, Centerview, some of the biggest law firms. Think about Paul Weiss, for example. and essentially you have on the one hand the west coast talking about we've got to remove we've got to have primaries they're talking about a number of potential candidates yeah the hollywood money was like this is going to be a great tv show exactly we're going to have a circus with oprah was going to like do a couple of interviews to see kind of how the candidates featured in like difficult situations right much more silent was what people on wall street and i was kind of pushing them to try to kind of speak up, say what they thought about it, be good kind of a little scoopet for this new political reporter.

2:59And they said, no, no, this is not how we operate. And they operated exactly how they operate on the deal, behind closed doors, putting pressures on the likes of Schumer, the Senate leader for the Democratic Party, on Hakeem Jeffries in the House. And I think a couple of days before Biden stepped down, I wrote a story saying essentially, wall street has made it clear there's no more money as long as it's biden yeah he either stepped down or he's done but more interestingly than that they already had a plan for harris to be the person to replace him they thought the idea of having a mini primary was like terrible they were very scared of potentially the party moving even further left yes like wall street has been complaining for the longest time of Biden's shift to the left, especially on antitrust and being kind of generally perceived as anti-business.

3:58Yes. I know this is impossible to answer with certainty, but when the money spoke, was the decision made? In other words, was it determinative that Wall Street said, we'll cut you off unless we have a new candidate? I'd like to say 100 % yes. I'll say 99.9 % because you can never be so definitive. But we went out with the story on the Friday saying he's going to leave this weekend and he left. And what was fascinating though is how capable these guys, mainly guys, on Wall Street were to kind of also plan the next steps to make sure that Harris would be the candidate, that all the money would flow to her and they made it clear that like also to potential rivals, we are not going to fund your race.

4:46Yes. This is over before it began. Exactly. Wow. Okay. You mentioned that she's perceived as business friendly and Wall Street friendly by Democratic donors. I want to go into that in a little bit more detail. What is it that Wall Street money cares the most about and why do they think Kamala is the person to deliver that? Wall Street wants one thing above anything else, and that's stability. And Harris is somebody who they've known for many years. Men in Wall Street kind of financed her races back in the mid 2000s. Big Wall Street names backed her primary race in 2019 when she lost to Biden for the nomination.

5:33So she's a well-known entity. She's considered to be level-headed. Her sister, Maya, is very close to many people on Wall Street. She's kind of an intermediary for the industry. Also, she's liked by the tech industry. She's from California. She's got a much more nuanced approach to antitrust than some of the current kind of people in the administration have. So, she's just much more easy to deal with. That's interesting that there's perceived to be a space between her and the Biden administration on tech, you said, and potentially on other issues. Totally. I mean, she's kind of a clean slate in many ways.

6:14We don't really know what Harris stands for on many issues, especially on economic issues. She hasn't really set up her own agenda because she's just stepped into the race, right? And I think what she's been able to do is say, let me reset things. She's done that. This past weekend, she used her advisors, many people from Wall Street, and reached out to the crypto community and said, we know you guys didn't like what we were doing. I'm the new leader here. Let's talk about this. I'm open. And does that mean under a Harris administration, Gary Gensler might not be head of the SEC? That's very possible.

7:01I think she's coming into this with a very open mind. She wants to win. That's clear. And we're not suggesting that she's going to become like, you know, a radical libertarian. No. But it's much more in the vein of Obama, Clinton, kind of like Democrats, if you want. And let's not forget, Biden was not forced. He made the strategic decision to kind of shift more to the left on economic and kind of financial matters because he had to deal with Bernie Sanders. He had to deal with Warren and so forth. Young voters. Yes. And so somebody like Lena Khan and Jonathan Cantor at the DOJ on antitrust were kind of the representative of that kind of more leftist, more progressive wing.

7:51I think we're auto-correcting now back to the center because there's a sense that that's how you can win this election. And I think Harris will have much more freedom not to be necessarily pro-business, but the one thing that everybody tells me is like we want the Democratic Party to move away from being anti-business to being reasonable on business. And so will they increase corporate tax rate by a point or two? That's fine. What they do care about and they will succeed is that she doesn't increase carried interest taxation. Leave the private equity folks alone and we will give you all the money you need.

8:30I mean, that's where the big money is. And we should tell listeners that carried interest is the favorable tax treatment of profits from private equity. Correct. By the way, we just had an election in the UK. Initially, the Labour Party, which won that election, was going to go after carried interest. At the end, they came up with a convoluted hodgepodge where carried interest doesn't get touched. It's the one thing that survives any administration, left, right, center. After the apocalypse, it's going to be radioactive cockroaches. And carried interest tax exemption will be the only things left of human civilization.

9:10Okay, so you said stability. Yes. And what you just said suggests that another priority for Wall Street is they want more openness to mergers and acquisitions. They want the green flag on deals. Do you think that figures into the industry's calculus as well? 100%. You've seen a lot of donors, the founder of LinkedIn, Barry Diller, who owns a bunch of media titles as well as Tinder, saying we've got to get rid of Lena Kahn. Like, Lina Khan, Rob, it's hard to explain. She has been the number one most hated person on Wall Street. I mean, the level of hatred I've seen towards this person is insane.

9:54And so she represents the anti-business side of that party. And so by removing her, it would be a huge win for Wall Street. I also think, though, that especially Reed Hastings of LinkedIn, he was so explicit and a couple of other people have been so explicit about their desire to get rid of her. It pushes Harris into a corner in a way. So some of these guys on Wall Street told me that the people coming out publicly were being slightly dumb. Essentially, to your point, were making her life much harder because she already probably wanted to get rid of her, of Khan. Now it's going to look bad if she does.

10:34And so somebody told me, like, the guys on the West Coast need to shut their mouth. Yeah. Very interesting. It was a bit more colorful. I'm sure. I'm sure it was. Let's turn to the West Coast. while we're here. So the other big money, and the two are, of course, closely commingled, is West Coast money. Is the picture broadly the same? Harris's brother-in-law is an Uber executive. She's from California. Is the positivity you're hearing from Wall Street extending out to Silicon Valley? Yes. Again, I think a little context. We've had a bunch of stories out in the FT and other publications about how Silicon Valley has kind of become much more, has embraced to some extent Trump.

11:19And that's true. But I think we should add a little nuance to that idea. A lot of the more libertarian wing of Silicon Valley, the crypto community, crypto bros, if you want, have been very outspoken against Biden, have been very pro-Trump. So people like Peter Thiel, Correct. Elon Musk. Correct. And a bunch of other VC guys. I would say they're less mainstream figures. I think if you checked out people working at Google, I'm confident, I haven't checked this, but I'm pretty confident that the majority of people working at Google, Meta, are probably giving the maximum contribution they can make to the Democratic Party.

12:05Yes. having said that i think harris has already reached out to the crypto community and wants to rebuild that relationship she's also like historically not being very anti big tech because that is kind of her constituency it doesn't like you know she was a senator from california a bit like chuck schumer needs to who's the senator from new york he needs to represent wall street that is an important kind of yes community driver of his constituencies kind of wealth and so i remember already back in 2010 when we started seeing a ramp up of pressure against big tech and it's kind of monopolistic tendencies i think caris's point was well we shouldn't like just you know because they've done a couple of bad things or there's a few issues we should block everything we should look at things much more in a nuanced way and the word nuances generally means let's not do much about anything um and so i think what we'll end up seeing is that she'll be maybe much more aggressive on issues like privacy protecting people's kind of right to privacy and consumer rights but she will be quite surely more or less say fair on matters of mergers and acquisitions.

13:23For that to happen at some point, I doubt she removes Lena Khan immediately, which is the one thing big tech also wants. But she might be eased out after a year or two. Yes. Let's flip the coin to the other side. A lot of what you've said today surprises me a bit because I think of Donald Trump as the man of business who takes a lot of pride in the stock market going up. Absolutely. And I would think that a lot of big money in the country would be enthusiastic about him. How does Wall Street feel about the possibility of a second Trump administration? So up until a couple of weeks ago, I think Wall Streeters, people on Wall Street, are historically kind of Democrats because this is a blue state, right?

14:18Yes. But in their hearts, they want low taxes more than anybody else. They're like, Wall Street likes money, as it turns out. Yeah, shock. But one thing that they were kind of annoyed with Biden, there's a general sense that Biden hated them. And that administration, more than Biden, Biden was appeasing to people who actually hate Wall Street. And so a lot of my sources who were lifelong Democrats were seriously considering putting money towards the Trump campaign. They didn't want to do it publicly because their kids have to go to schools. They live in New York still. They need to kind of - Go to parties.

15:00Exactly. But what people told me is like, for me, Trump is great. He's going to lower my taxes. It's like, I mean, I'm going to get richer. Yeah. Then two things happen. one he named jd vance his vp and harris became the nominee those two events kind of made a lot of people on wall street think okay vance is kind of talking about destroying wall street and the parties over and it's like this sounds like i didn't know that aspect of vance you know he was a venture capitalist for a while wasn't he i mean i had i'm not as aware of of his kind of anti I guess he's anti big tech. He's a little suspicious.

15:41I mean, Vance said that the only decent Democrat around is Lena Kahn. And I said, what? What is happening? But the problem also with Vance and with Trump is like, you never really know where, like, that element of unpredictability. It comes back to your point about stability. Yes, frustrates them. And like, one told me, you don't want to see Trump competing with Vance and who is more anti-Wall Street. And so Vance was kind of weird for Wall Street. They don't know what to make of him. And it's like he hated Trump. Now he loves Trump. Now he's like. Who is this guy? It's uncertainty. And money hates uncertainty.

16:17He's the Bernie Sanders of the right kind of thing, which I think is unfair on Bernie Sanders. And on the other hand, we go back to what we've just been talking. Harris is just kind of somebody they have known for much longer, much more stable, has said all the right things. about things that they care about. And it's just like, yeah, let's just stick with what, you know, the devil you know. And it's like, it's never going to be perfect. But, you know, these guys are already rich. It's not going to get terrible for them. Well, you and I are journalists, so we're already poor. So how much worse can things get?

16:54Easy. We'll be right back with Long and Short.

17:06Welcome back. This is Long and Short, where we go long things we like and short things we don't like. I've picked a long, James, specifically to disgust you as an Italian and a lover of food. I'm long McDonald's. First, because I actually eat McDonald's quite a bit when I'm in the car with my kids, and I enjoy it to the horror of my nice middle-class friends and relations. And second, because they've been struggling a little bit lately. There was a kind of post-pandemic restaurant boom. That has now faded. They reported a set of results this week that were kind of meh, and their kind of sales are as weak as they've been in a long time.

17:47But this company's capacity for reinvention and making comebacks is incredible. I think it's a very well-run franchise operation. And I think burgers and fries will always sell. So I'm long McDonald's. I think that's fair. I thought you were going to go long on Starbucks, which I would have had a bigger problem with. What about you? Are you long or short something, James? I'm going short on Bill Ackman. He was supposed to launch a$25 billion worth IPO of his kind of investment fund. Then he said it would be$10 billion. Then he said that people weren't getting it. So he kind of came out and said a bunch of things that he wasn't supposed to say, which delayed his IPO.

18:36Now we're talking of a$2 billion IPO. Soon he's going to be giving us money. So I'm sure because, I mean, it's already gone that way. So he's shorted himself, frankly. The big question, though, is, I mean, he's making a bet that, like, the retail market, he's become extremely popular on X, what used to be Twitter. he has endorsed Trump he's essentially hoping that MAGA people will take him to the moon I don't believe that he wants to be a meme stock he said he wanted to be Buffett but he's actually going to be like a meme stock well we're still hoping that Unhedged becomes a meme stock and hopefully by the time we are back in your feed on Thursday listeners we will be Unhedged is produced by Jake Harper and edited by Brian Erstad.

19:27Our executive producer is Jacob Goldstein. We had additional help from Topher Forhez. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn, and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Rob Armstrong. Thanks for listening.

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