As It Turns Out, Talk of Increased Hedge Fund Regulation Increases Hedge Fund Political Donations

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We once had dinner with a cynical old man who told us that one of the main purpose of legislative hearings was to solicit political donations from the industry being scrutinized. The same guy also told us that it was wrong to think of regulatory agencies as being captured by special interests over time. Those agencies are created by legislators at the behest of the industries that have paid them off. We’d like to think this was all just political paranoia, but the man also happens to be one of our most prominent federal appeals court judges.
We’ve never seen a better example of this than the hedge fund regulatory mess. Reading the story of how more and more hedge fund money is being sucked into Washington DC reminds us of the scenes from the Godfather II where the young Vito Corelone learns how Don Fanucci controls the neighborhood. Political scientists have a technical term for this kind of thing: shakedown.
Hedge fund cash flows ahead of U.S. election [Reuters on MSNBC]

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