JPMorgan Chase Fills Senator Mark Warner's Campaign Chest
WASHINGTON -- During the first three months of 2011 employees of JPMorgan Chase piled in campaign contributions to the campaign committee of Sen. Mark Warner (D-Va.), who has wound up at the center of the deficit debate over taxes and spending.
From January to March, employees of JPMorgan and Highbridge Capital Management, the company's hedge fund, contributed $87,600 to Warner's campaign committee, according to campaign finance filings. These contributions, which came from a fundraiser for Warner hosted by JPMorgan, amounted to a quarter of all contributions Warner reported receiving in the first quarter of 2011. JPMorgan's employees and the company's political action committee have given a combined $194,400 to Warner over the course of his career, making the company the biggest donor to the senator's campaign committee.
In total, Warner received $151,286 from banks, investment firms and investment advisers in the first quarter of 2011. These contributions accounted for 43 percent of his total receipts during the same period. That's already more than he raised from these groups over the past two years.
Since late last year, Warner has been involved in conversations over how to reduce the long-term deficit as a member of the so-called "Gang of Six." (The group has since shrunk to a party of five after Republican Sen. Tom Coburn of Oklahoma dropped out.) Many of the issues arising in deficit negotiations are of special interest to JPMorgan, as well as to other banks and investment firms. These include discussions on closing tax loopholes, capital gains tax rates and a potential financial speculation tax.
Warner's office disputes that JPMorgan's contributions have any bearing on the senator's positions on the deficit negotiations. Responding to a question of whether contributions provide any special access, Warner spokesman Luke Albee gave HuffPost a one-word answer: "No." Albee also stated that JPMorgan has never lobbied the senator on the issue of deficit negotiations.
Albee labeled Warner as the "most active architect of the Wall Street reform bill," along with former Sen. Chris Dodd, D-Conn., the chair of the Senate Banking Committee.
"[Sen. Warner] repeatedly took public positions at odds with Wall Street," Albee said, citing the senator's position on the Credit CARD Act, systemic risk, the Consumer Financial Protection Bureau and an amendment on mortgage cramdown proposed by Sen. Dick Durbin (D-Ill.).
According to his office, Warner also refused to accept campaign contributions from the financial industry during the discussions over the Dodd-Frank financial reform bill.
Warner did step up for for the financial sector in one area last year: When the House voted to eliminate a tax loophole, the senator worked to exempt venture capital funds from the change.
In 2010, Warner was one of a few senators who were instrumental in blocking an increase of the tax rate on carried interest, the percentage of income paid out to investment managers.
At the time, James Surowiecki explained in the New Yorker how the carried interest taxation amounts to a multi-billion dollar loophole:
In a typical private-equity fund, the managers get paid two per cent of assets as a regular fee, plus twenty per cent of the fund's profits. They pay regular income tax on the two per cent. But on their share of the profits, which is called "carried interest," they usually pay only long-term capital gains -- even though they put up hardly any of the fund's actual capital, most of which comes from outside investors.
Last year, a provision attached to a House-passed tax extenders bill sought to tax most of the carried interest earned by venture capital, private equity and real estate investment fund managers as earned income, increasing the tax rate as high as 38.6 percent.
When the bill moved to the Senate, Warner backed a change that would have exempted venture capital funds from the higher rate. Warner voiced his concern about the provision in a letter co-signed by three other Democrats and Sen. Scott Brown (R-Mass.) which stated that the provision "could not occur at a worse time." The letter echoed talking points from the National Venture Capital Association, including on statistic that said "venture-backed start-ups are adding over 4,000 jobs each month."
The carried interest provision was ultimately omitted from the bill.
JPMorgan is currently the only major bank that lists carried interest as a lobbying issue for 2011.
One explanation for the bank's stake in preserving carried interest could be the January announcement of JPMorgan's intent to create a new real estate fund. Known as Junius Real Estate Partners, it "will be wholly owned by J.P. Morgan Asset Management; however, the seven or eight team members will keep a 'sizable portion of the profits' in the form of carried interest."
The President's deficit commission has proposed eliminating the capital gains tax rate -- which currently affects carried interest -- entirely. Capital gains and carried interest would both be taxed at the personal income rate, which the commission recommends lowering to counterbalance the elimination of loopholes like carried interest taxation and the special rates for capital gains.
Warner has already stated that the "Gang of Six" will avoid tax hikes, which would likely include raising capital gains taxes to the personal income tax level. According to an earlier HuffPost report, Warner said the group will not propose actually raising tax rates.