Did Fat Cat Bankers Really Turn Against Obama Because He Called Them “Fat Cat Bankers”?

US President Barack Obama walks across the South Lawn upon return to the White House on October 31, 2012 in Washington, DC. Obama was returning from a visit to hurricane stricken New Jersey.

Photo by MANDEL NGAN/AFP/Getty Images

Whitney Tilson, head of the hedge fund 2T Partners and a major donor to education reform causes, wrote out his multipage case for Obama’s re-election over the weekend. It’s an interesting document both because it’s a smart analysis and also because it’s microtargeted at a rather unusual constituency, Tilson’s fellow rich finance guys. Candidates obviously spend plenty of time courting that crowd for money, but relatively little of the visible campaigning is devoted to the financial elite.

Meanwhile, Sheelah Kolhatkar has a brief Businessweek piece on Tilson’s memo and how it’s “lonely” these days being an Obama supporter on Wall Street. In Kolhatkar’s telling, this falling out between Obama and finance is all personal:

It’s a good bet that of all the off-the-cuff remarks politicians have let slip over the past four years, none has been so costly in dollar terms as President Barack Obama’s infamous “fat cat bankers on Wall Street” comment. Since then, one Wall Street bigwig after another has denounced Obama, from AQR Capital’s Cliff Asness, to Third Point’s Daniel Loeb, to Blackstone (BX) founder Stephen Schwarzman’s comparison of the administration’s tax plans to a Nazi invasion. Which is why the investor Whitney Tilson’s endorsement of the president yesterday stood out.

This idea that the fat cat bankers remark was a key turning point is certainly a story that’s passed around in New York and among some Democratic Party fundraising types, but it doesn’t really make much sense. After all, every candidate claims to be standing up for the little guy against the fat cats. Indeed, if you listen to what Mitt Rommey says about Wall Street regulation his critique is that Obama’s Dodd-Frank financial regulation overhaul amounts to a permanent bailout for big banks that’s crippling small business. And yet those remarks haven’t turned Wall Street against Romney because people who need to know are well-aware that Romney’s policies are fantastic for rich banker types. He wants to do less to regulate their businesses and cut their taxes!

Back to Tilson who, as quoted by Kolhatkar, has this exactly right:

Wall Street’s anti-Obama sentiment is “perfectly reasonable” from the industry’s perspective, Tilson says. “There is some rationality to it in terms of, ‘whose bread I eat, whose song I sing.’ … Romney wants to eliminate or gut the main elements of Dodd-Frank, for example; the Consumer Protection Bureau that Elizabeth Warren set up is bad news for bank profits in that it protects consumers. I would say, in general, Romney and the Republicans would be much more favorable toward high profits of financial firms.” But, he adds, “My view is: Obama has gone much too easy on the financial sector.” If going public with his views costs him some potential investors, says Tilson, “I’d like to think that for every person that it hurts, there’s someone else who—even if they didn’t agree with me—respects what I did.”

Fat cat bankers haven’t turned on Obama because he called them “fat cat bankers,” they turned on him because he’s pushing policies that’ll make it harder for fat cat bankers to make money. Recall that the context of the remark was Obama talking about his frustration over Wall Street’s fierce opposition to regulatory reform just months after excessive risk-taking had necessitated massive bailouts. That’s the issue. Obama was trying to regulate Wall Street, Wall Street didn’t like it, Obama didn’t like that they didn’t like it, and that’s why Wall Street doesn’t like Obama. Romney is promising to repeal new regulations and replace them with hand-waving. It’s a pretty straightforward policy dispute that has nothing to do with name-calling.