Why Wall Street is hoping Jeb Bush will be just like his brother

Raising as much money as is humanly possible is the current center of Jeb Bush’s political strategy, and from the beginning, Wall Street events, including a staggering $100,000-per-plate dinner, have been the key to his financial strategy.

This naturally raises the question of what Bush has done to earn his status as Wall Street’s favorite presidential contender.

For now, he hasn’t released any policy proposals to the public — or even admitted that he’s running, because doing so would make it legally tricky to do so much fundraising — so it’s impossible to know exactly what his donors see in him. But one hint comes from his brother’s administration. Jeb is at pains to tell the world he’s his own man. But George W. Bush was quite possibly the best friend Wall Street has ever had in the White House, making Jeb’s banker donors one group of people who are definitely hoping he takes after his brother.

The basic case for George W. Bush as the banker’s friend starts with his signature domestic policy idea — that rich people were paying too much in taxes. Upon taking office in 2001, Bush immediately set about to enact a very large reduction in the amount of taxes that rich people needed to pay, and then in 2003 he did it again. Rich bankers love this stuff.

But of course, there’s more to life than taxes. Under the Bush administration, top officials from the two main institutions regulating financial institutions literally staged a photo op with bank trade association leaders in which the regulators used a chainsaw to slice some red tape. The idea was to get big government off the backs of the industry and unleash some new lending activity — and boy did it work, encouraging a debt-financed boom in housing prices that made everyone feel better about the economy, until suddenly it stopped and made everyone feel awful.

Yet lots of Republicans can offer a cocktail of low taxes and business-friendly regulatory policies.

What made Bush really stand out was that when the going got tough in 2008, he threw all his free-market principles out the window, and suddenly it was bailout city. People remember TARP, of course, but polling indicates that most people wrongly remember it as an Obama administration initiative. And before TARP there was the nationalization of Fannie Mae and Freddie Mac, concurrent with a massive bailout of their creditors. This was alongside quasi-bailouts like the government-birthed sale of Bear Stearns to JPMorgan and Countrywide Home Mortgage to Bank of America.

Since Bush left office, Wall Street has largely been forced to choose between an Obama administration that stands for financial stability through regulations and bailouts and a congressional GOP that stands for free-market dogmatism. The old free lunch of deregulation plus bailouts hasn’t really been on the menu. But it was tasty while it lasted.

To be clear, the interests of Wall Street have found favor in many administrations. But that’s actually what makes the Bush combination so amazing. Ronald Reagan, for example, slashed regulation in the form of 1982’s important but forgotten Garn–St. Germain Depository Institutions Act. This deregulation touched off a lending boom and bust that’s gone down in history as the S&L crisis. There were even some costly bailouts. But Reagan paired the deregulate-and-bailout agenda with a meaningful effort to prosecute wrongdoers after the fact, and more than 800 convictions were secured during the Reagan and George H. W. Bush administrations.

The Obama administration has delivered bailouts and gone light on prosecutions of past wrongdoing, but has also acted to increase regulation of the financial sector and raise taxes on the rich. The Clinton administration offered some deregulation, but Clinton raised taxes and bankers largely avoided blowing up the world on his watch, so there wasn’t much reason to get tough.

Bush delivered a true sweep in which banks got essentially everything they could ask for — low taxes, light regulation, bailouts, and impunity. It was the best of times, and there has to be something tantalizing about the prospect of bringing it back.