Wall Street Banks Limit Harris-Walz Donations

Vice President Kamala Harris Minnesota Governor Tim Walz selected as running mate created an unexpected challenge for Wall Street political donors.

Major financial institutions now face strict regulations that could limit their employees’ ability to contribute to the Harris-Walz campaign.

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At the heart of the problem, first reported by Business Insider, is the Securities and Exchange Commission’s “pay-to-play” rule, passed in 2010. The regulation aims to prevent financial firms from influencing politicians through campaign contributions in hopes of securing lucrative government contracts, such as managing state pension funds.

On August 6, Citigroup issued a memo requiring most U.S. employees to seek prior approval before donating to the Harris-Walz campaign. According to Business Insider, the policy affects employees in the investment bank, wealth management, and other divisions, with only the retail banking arm exempt.

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The stakes are high for financial institutions. Even small donations can result in significant penalties. In 2017, Pershing Square was fined $75,000 after an analyst made a $500 contribution to a Massachusetts gubernatorial candidate. Similarly, JPMorgan Chase agreed to provide pro bono advice to a Tallahassee, Florida, pension fund for two years because of an employee’s past political donation.

According to data cited by Insider from the Center for Responsive Politics, the situation contrasts with the 2020 election, when Wall Street donors contributed more than $74 million to Joe Biden’s campaign.

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The regulation doesn’t just apply to the SEC. Similar rules exist at other financial regulators, including the Commodity Futures Trading Commission and the Municipal Securities Rulemaking Board. The rules generally prohibit companies from providing certain services to state and local governments for two years after affected employees make political contributions to affected officials.

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However, according to Skadden, a New York-based law firm, the regulations have some nuances. A de minimis exemption exists for individual contributions — $350 under SEC, CFTC and FINRA rules and $250 under MSRB Rule G-37. The exemption applies whether or not the donor is a Minnesota resident.

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Critics say the regulation could stifle political participation. Insider noted that in 2022, SEC Commissioner Hester Peirce criticized the pay-to-play rule, calling it an “extremely blunt instrument” that imposes “one-size-fits-all rules,…