Hedge Funds & Politics: Presidential Politics Edition

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Hedge fund political giving continues to climb, the Washington Postreports this morning. The post runs down the connections of a number of presidential candidates to hedge funds, mostly by adding up how much money candidates have received from hedge fund employees.
The candidate receiving the most money from the employees of a single hedge fund is a man you might not have known was even running for president. Senator Christopher Dodd has collected $175,000 from SAC Capital employees for his run for the White House. While Dodd is hardly a favorite to win his party’s nomination—much less actually get elected President—he has two advantages on his side: he is the Senator from Connecticut, where a lot of hedge funds have their offices, and he is the chairman of the Banking Committee, a position he has used to block legislation that would impose additional regulations on hedge funds.
The other favorite candidates of hedge funds are better known: former New York mayor Rudolph Giuliani, New York Senator Hillary Clinton, and former democratic vice-presidential nominee and Senator from North Carolina, John Edwards. Fortress Investment group makes up the largest single corporate donor to the campaign of John Edwards—probably because he went to work there as a consultant after the failure of the 2004 Kerry-Edwards presidential campaign.
Why have hedge funds started getting more involved in politics? For some this is a sign that the industry is “maturing” or becoming more responsible and involved in democratic politics. For more cynical observers, it seems like hedge funds are trying to buy influence to ward off regulations.
But those folks aren’t cynical enough for some students of the relationship between politicians and hedge funds. The uber-cynics argue that the would-be cynics have it backwards: the threats of regulation were intended to force hedge funds to donate more to politicians and buy the services of lobbyists.
“Actually, they're being threatened with regulation so they would form PACs and otherwise get organized,” Larry Ribstein of Ideoblog says. He points to a letter to the editors of the Wall Street Journal from Andy Morriss:

Politicians target an unorganized but wealthy industry by holding hearings, calling for regulatory action, proposing legislation, and so forth. Alarmed, the industry organizes interest groups and begins making contributions to the politicians. Miraculously, most of the threatened regulations then vanish from the agenda, leaving the politicians richer and the industry poorer but wiser. Whenever a new round of contributions is needed, another round of hearings on the latest issue can be scheduled.


Hedge-Fund Ties Help Edwards Campaign
[Washington Post]
Rent Extraction [Cafe Hayek]

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