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What Does Wall Street Want In A Presidential Candidate?


Ted Cruz, the Republican presidential candidate, will be in New York City today. He'll be courting some of the very people he has criticized on the campaign trail - Wall Street bankers. We wondered what these conversations might sound like, what hedge fund managers and private equity firms actually want to hear from a candidate. So we called Barry Ritholtz, chairman of Ritholtz Wealth Management. He's a frequent commentator on the world of finance.

BARRY RITHOLTZ: Bank chiefs and other Wall Street executives, they're concerned about the regulatory environment. They look at the rules that go into place to prevent another financial crisis as reducing their profitability. Taxes are something that's going to affect everybody. The problem is, the things about taxation that we're hearing from all of the candidates, really, are fantasy lands. Ted Cruz is talking about tax cuts without offsetting spending cuts. That's going to create a 7 or an 8 trillion - with a T - dollar deficit over the next decade. On the other side of the aisle, when we look at Bernie Sanders, some of his proposals also will cost trillions and trillions of dollars.

GREENE: So Wall Street people are just sitting there watching this being, like - I mean, they're just - they're just talking. None of this is actually going to happen.

RITHOLTZ: On some of it, they're talking. I'll give you an example of a regulation that only applies to a few thousand people in the country that there's a debate over whether or not it will get changed. There's something called the carried-interest loophole.


RITHOLTZ: And normally, your income is taxed as personal income. And if you're a high-earning hedge fund manager in New York, Connecticut, New Jersey, you're probably in the 40 to 50 percent tax bracket. And what this carried-interest loophole does is treats a big - in fact, a disproportionate amount of their income as if it was a long-term capital gain, not as if it was something they earned through the sweat of their brow.

GREENE: So this is basically a loophole that allows people who have a lot of money to not pay nearly as much taxes because it's not treated as income. And what are some candidates saying about whether they would keep that loophole, get rid of it?

RITHOLTZ: Well, Bernie Sanders has been the most vociferous about getting rid of it. And on the Republican side, there was one speech that I saw Donald Trump give where he came out against it and then kind of backtracked a little bit. The rest of the GOP candidates seem to have not much of a problem with it.

GREENE: Well, let me just ask you a broad question because predictability is always so - it's seen as so important to Wall Street. I mean, they want to sort of know what regulations might be there, won't be there. They don't like surprises. When it comes to predictability, is that an issue? And how are people sort of on Wall Street thinking about the different candidates?

RITHOLTZ: So if predictability matters, then what you need to be thinking of is either John Kasich or Hillary Clinton because they are known entities. When we look at the Ted Cruzes (ph) and Bernie Sanders and Donald Trumps, there isn't a whole lot of predictability there. And especially what's made this campaign season so amusing and/or horrifying is the randomness that Donald Trump has been coming out with.

GREENE: Donald Trump, who you would think this world would sort of feel like they know.

RITHOLTZ: He is probably the least predictable person. And as someone who's the most non-traditional politician running, I suspect that's not a coincidence.

GREENE: Let me just ask you, if you can, to take me into the room when Ted Cruz is in New York courting people - Wall Street bankers and others. Is a meeting like this - I mean, is it just to be able to get some face time with someone who could be president, or is there something that people on Wall Street might get out of this?

RITHOLTZ: Listen, Wall Street does nothing if they don't hedge their bets, right?

GREENE: Right.

RITHOLTZ: There's never anything wrong from their perspective of having a familiarity with somebody who, worst-case scenario, is still, you know, a sitting senator for the foreseeable future. Having access to this person, sort of being able to stare him in the eye and figuring out who he is, even if they don't believe he's going to be president one day, can't hurt.

GREENE: Barry Ritholtz, thanks so much for talking to us. We appreciate it.

RITHOLTZ: My pleasure.

GREENE: Barry Ritholtz is the chairman of Rithotlz Wealth Management. Transcript provided by NPR, Copyright NPR.