Dem
51
GOP
49
As mentioned above, Ronald Reagan was a big fan of free markets. Among other things, that meant letting Wall Street firms manage investments the way they wanted to, without the government telling them what they could and could not do, as long as they stayed within the law. In the past decade or so, investment funds with $18 trillion in assets have decided that companies that care about E.S.G. (Environmental, Social, and Governance) factors have the future and companies that disregard these factors will ultimately fall by the wayside. Thus whether a company cares about E.S.G. is a factor in determining whether to invest in it. This is simply a business decision about trying to determine which companies will succeed and which will fail in the future.
Republicans see this as supporting woke corporations and want to make it illegal for investment funds to consider E.S.G. when making investment decisions. So, if a tobacco company or an oil company is paying a higher dividend than a solar energy company, the Republicans don't want to allow the fund managers to say "we don't think tobacco or oil companies have a bright future, so we don't want to invest in them, despite the higher dividend." In other words, the Republicans want to overrule the free market and not let the funds use their own judgment to determine what to buy. Again, there is no law or rule requiring funds to consider E.S.G., only one that says they are free to do so if that makes business sense to them. Put simply, the Republicans want to make it illegal to consider some factors that fund managers think are relevant companies' future success.
On Tuesday, the House voted 216 to 204, largely along party lines, to repeal a Dept. of Labor rule that allows retirement funds to consider climate and other factors when making investment decisions. They say they are battling woke capitalism, thus dragging Wall Street into the culture wars. From the point of view of their base, attacking Wall Street is definitely a winner. From the point of view of wealthy Republican donors, maybe not so much.
Senate Republicans, joined by Sen. Joe Manchin (D-Coal) and Sen. Jon Tester (D-MT) are for the House bill. Tester is often friendly to environmental legislation, but he is up for a tough reelection battle next year and his state is a major coal producer, so he felt he has to support the bill, even though he doesn't agree with all of it. Some Republicans are clear that they realize this bill will raise the prospects and stock prices of fossil fuel companies and companies that pollute a lot. They see that as a good thing. Other Republicans say the only task the retirement funds have is to maximize the money available for retirees. Implementing one climate policy or another is not part of the fund managers' job descriptions. Late yesterday the Senate voted and the House bill passed the Senate 50-46 with four senators abstaining. Joe Biden has said he will veto the bill. If he does, it will be his first veto.
The bill is just one prong of a multipronged attempt to kill E.S.G. Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee, plans to hold hearings this year at which he will grill executives from the biggest banks about climate change, social issues and more. Needless to say, JP Morgan Chase CEO Jamie Dimon, who loves the spotlight as much as Donald Trump, will jump with joy when the subpoena arrives. He will be pleased to tell McHenry that Chase considers E.S.G. very important from a strictly business perspective because he thinks that companies that eschew it don't have much of a future and thus are not worth investing in. When McHenry asks Dimon why Chase stopped lending money to oil companies in 2020, Dimon will tell him: "It's too risky." Other bank CEOs are likely to tell the same story, albeit with less enthusiasm. Nevertheless, by carefully choosing who gets subpoenas, McHenry can probably find some conservative executives who will tell him that fossil fuels have the future. Vanguard, for example, recently pulled out of the Net Zero Asset Managers initiatives, which is intended to get money managers involved in fighting climate change. If he can control who gets to speak at the hearings, he can probably make it look like Wall Street has gone pinko, but if Democrats get to put folks on the invite list, that won't happen.
Political theater aside, traditionally Wall Street supported Republicans, but if McHenry makes a big effort to tar Wall Street as woke, that support could vanish or maybe even switch sides. Going after the big banks with everything you've got and expecting them to suffer in silence may not turn out to be a good strategy. (V)