Private Equity: Obama and McCain
President McCain or President Obama
This is a very important day in America, as the nation decides whether Republican John McCain or Democratic Barack Obama becomes President of the United States. In many ways the winner will likely change the course of this country, for better or worse. What are the implications for private equity under President McCain and President Obama? Before the results come in, I’d like to do a brief summary of the presidential candidates’ positions on private equity and investing.
In the primary season, when Hillary Clinton was fighting off Barack Obama for president, the Wall Street Journal did a piece comparing Barack Obama to Nermal (the softer, lovable feline opposite to the cartoon character Garfield). The comparison of Barack Obama and a kitten stems from Obama being able to attract seemingly opposing endorsements.
A striking example is that Barack Obama’s presidential campaign took in more contributions from private equity than any other candidate (except early-dropout Mitt Romney) in the race at $253,788 just in 2007. Mitt Romney is a more reasonable funnel for private equity donations as he is a founder of Bain Capital, but dropped out in February 2008. At the same time, Barack Obama received an endorsement from the Service Employees International Union which publicly opposes private equity (recently confronting the Carlyle Group’s David Rubenstein).
It makes sense that private equity would want to invest in potentially the next president because Obama has pledged to change the treatment of the capital-gains tax. The private equity industry opposes these changes and it’s possible some see the best move is to support Barack Obama so that he may reconsider if elected.
President John McCain, on the other hand, promises little change to the existing tax treatment and more importantly the treatment of capital-gains tax. Therefore, most private equity contributions to the McCain presidential campaign is in hopes of getting him elected to ensure things stay the way they are for private equity. He has received a good size contribution from Henry Kravis of KKR private equity, as well as from high-profile CEOs at investment banking firms all of which hope to see their taxes stay the same if not decrease under McCain as president. The Wall Street Journal concluded a recent assessment of which presidential candidate has the bigger support from the financial sector and found McCain to have more allies funding him.
McCain has also built support from venture capitalists based on his treatment of business taxes, specifically offering lower taxes than his Democratic competitor. This is extremely important for small businesses who have fears that President Obama would raise taxes on their startup. Bob Brady, a partner at the Carlyle Group, recently argued in a editorial titled “Why Venture Capitalists Should Support John McCain” that venture capitalists should vote for McCain concluding:
Senator Obama certainly sounds and looks good. But this important election is about policies, not personalities. And on the issues most important to venture capitalists – capital formation, taxation, economic growth, job-creating investment, free trade, and access to highly skilled workers – it is actually Senator John McCain who has advocated and voted for policies that will protect and restore the key building blocks of innovation and investment success.
Today will no doubt have an important effect on the future of this country and private equity as well. By tomorrow, if not tonight, we will know if it is President Obama or President McCain that will inherit a shaky economy.
Tags: Barack Obama, John McCain, Private Equity Barack Obama, Private Equity John McCain, President barack Obama, President john McCain, Private equity 2008 election, Election results
I am not here as a political commentator but I do take note of the daily battering of the industry in the mainstream news outlets. Late last week and early this week I published a few posts on Obama and his blasting of hedge funds for looking out for their investors. You may read these posts here and here and here.
