While the 2020 presidential race kicks into high gear, the private equity industry is focusing on protecting the Republican party’s majority in the US Senate.
The reason is simple – while the industry has good relations with Democratic nominee Joe Biden and his running mate, California Senator Kamala Harris, it is increasingly nervous about emboldened progressives pushing legislation unfriendly to the industry through Congress.
Josh Kosman, author of the book The Buyout of America, said he suspects most Wall Street executives would prefer Biden and Harris win the general election, while Republicans hold onto the Senate.
“The fear for private equity is the Democrats take Congress … because then you could see some congressional action that perhaps would go in front of Biden that would be tough for him to veto,” he said. “The private equity industry has done a very effective job of holding back significant changes.”
But in the last year or so, all of that has seemed to change. During her presidential campaign, Massachusetts Democratic Senator Elizabeth Warren co-wrote the Stop Wall Street Looting Act. As sister title Buyouts reported, the bill would drastically transform the private equity industry. Warren also went after the PE industry’s investments in private prisons, as Buyouts reported, and several other members of Congress recently called out Leonard Green & Partners over one of its investments in a health care company.
Warren and independent Senator Bernie Sanders of Vermont also both introduced wealth tax proposals during their primary campaigns, which drew millions of supporters before Biden finally prevailed.
Private equity has paid attention and is now deploying its capital into a much riskier and less assured investment: making sure it has as many allies in Congress as possible.
Schwarzman steps out
Blackstone Group co-founder Stephen Schwarzman is leading the way. He has funnelled $20 million into one Republican Senate Super PAC and another $1 million to one focused specifically on Republican Susan Collins of Maine, who is trailing her Democratic challenger in recent polls, according to data from the Federal Election Commission.
He also donated directly to Collins’ primary and general election campaigns, as did his wife, Christine, each giving $5,600 in total.
Schwarzman buttressed that support with two $500,000 donations to 1820 PAC, which is working on Collins’ behalf in the Maine election.
Considered a moderate Republican, Senator Collins has emerged as a critical vote on several issues, such as the 2017 tax bill and the confirmation of Supreme Court Justice Brett Kavanaugh.
Collins is facing a well-financed challenge from Democratic state house speaker Sara Gideon. According to Real Clear Politics, Gideon has opened a lead of between four or five points in most polls. A Quinnipiac University poll out this week had her up by 12 points.
Gideon also out-fundraised Collins by a considerable margin, raising more than $24 million to Collins’ $16.9 million in direct donations.
Schwarzman is not the only investment manager to support Collins. Thomas McInerney of Bluff Point Associates donated $150,000 to the 1820 PAC. Robert Delaney of Crestview Partners donated $5,000. Neither McInerney nor Delaney responded to requests for comment.
Overall, Collins has received more than $64,000 in direct contributions from Blackstone employees, according to the Center for Responsive Politics, a nonpartisan, nonprofit that tracks money in politics.
Support for Republicans overall
Schwarzman also made two separate $10 million donations to the Senate Leadership Fund, one in February and one in July.
He also donated almost $70,000 to the National Republican Senatorial Committee, and made other donations to the Republican National Committee, the National Republican Congressional Committee and a host of other PACs and super PACs.
In the past year, he also made direct donations to several Republican Senators, including Mike Lee of Utah, Joni Ernst of Iowa, Pat Toomey of Pennsylvania and Cory Gardner of Colorado, among others.
American Investment Council, an industry advocacy group, has a PAC to which Schwarzman also donated. Its largest single expenditure this cycle was to the National Republican Senatorial Committee, sending it $30,000. It also donated to Collins’ campaign.
Not a monolith
But neither Blackstone nor the private equity industry is a political monolith.
AIC supported many Democrats and moderate Democratic caucus groups like the New Democrat Coalition or the Blue Dog Coalition, which tend to support more business-friendly policies. It sent money to the New Democrats’ Action Fund and the Blue Dogs’ PAC, according to the FEC.
It also sent $10,000 to Steny Hoyer, the second-highest ranking Democrat in the House. The Council declined to comment for this story.
Another Democrat to whom the AIC contributed was Richard Neal of Massachusetts, who is a favourite of the PE industry, as Buyouts has reported.
Jonathan Gray, Blackstone’s president and chief operating officer, is a prominent supporter of Democratic candidates.
Although he has not donated directly to Gideon’s Maine campaign, he has donated to the Senate Democrats’ political action committee, the Senate Majority PAC. Gray donated $1 million in February. He also donated $35,500 to the Democratic Senatorial Campaign Committee last year. He donated to the AIC’s PAC, too.
Gideon has received her share of PE money. According to the CRP, she is one of the top 20 Senate candidates in total contributions from people in the private equity and investment industry, receiving $211,000. The top is Senate Majority Leader Mitch McConnell. Number two is Collins, with more than $520,000.
While Schwarzman donated heavily to Trump and various groups supporting him, other PE professionals have shown a preference for Biden, Harris and other Democratic candidates.
According to the CRP, Trump received $258,818 from people who work at private equity and investment firms. That is more than $1 million less than Biden, who has received $1,284,928, the most of any presidential candidate. Trump was also beaten by former Democratic candidate Pete Buttigieg, who received $444,671.
Harris was taken off the list when she dropped out of the presidential race, but appears on the list of Senators, having pulled in $213,572 in the 2020 cycle. Gray contributed to her presidential campaign last year, according to the FEC, one of several Democratic contenders to which he donated.
Blackstone did not respond to a request for comment from Schwarzman or Gray. Neither the Collins nor the Gideon campaigns responded to requests for comment.
Democrats taking over
Private equity leaders have been sounding the alarm about the rising wave of public opinion against the industry for a while.
Last year, Howard Marks of Oaktree Capital Management and James Zelter of Apollo Global Management both expressed concern about the wealth-tax plans of Warren and Sanders, as Buyouts reported. Both former candidates are still in the Senate.
“If the private equity industry wants to forestall long-overdue reform of its predatory practices, it will need allies in Congress, and all signs point toward major sums of money going to endangered Republican incumbents in the Senate,” wrote Carter Dougherty, a spokesperson for Americans for Financial Reform, a nonpartisan advocacy group, in an email to Buyouts.
Still, the path toward any of that passing appears steep. The Democrat-held House of Representatives had a hearing on the industry last year, which showed that many politicians still support the industry, though often with caveats, as Buyouts reported.
– This report originally appeared on sister title Buyouts.