Amid Push for Regulation, Hedge Funds Spend Big on Lobbying from Capital Eye

http://www.opensecrets.org/news/2009/06/amid-push-for-regulation-hedge.html

by Aaron Kiersh

As the White House and Congress propose new financial regulations in the wake of the recession, the hedge fund industry is stepping up its lobbying efforts. This morning's Wall Street Journal (subscription only) cites CRP data detailing hedge funds' political spending this year--$1.6 million in the 1st Quarter of 2009 on lobbying--as pro-regulation Democrats have assumed control over both Congress and the White House. However, despite what the article calls the industry's "increased profile," this total actually represents a decrease of 4 percent from the same point last year, according to the story.  

While hedge funds spent less than $1 million per year from 2003 to 2006, they shelled out $4.2 million and $6.1 million over the last two years, respectively, when they faced a bill that would increase taxes on hedge fund managers. Meanwhile, the lobbying expenditures of the overall financial services industry increased by only 38 percent between 2006 and 2008. Prior to 2007, the industry had not been a major big political player.

The Managed Funds Association (MFA), a trade group that bills itself as the "global voice of the alternative investment industry," has already spent $750,000 on lobbying. The group has retained a stable of white-shoe lobby shops such as Patton Boggs, which has been Washington's highest-earning firm each year since 2003. MFA has paid Patton Boggs $1 million over the past two years--$960,000 in 2008 and $40,000 so far this year.

Although the GOP may be perceived as more business-friendly, hedge funds have rewarded Democrats with campaign contributions since 1999. During the 2008 cycle, hedge funds gave Democrats $10.9 million, and Republicans $5.8 million. The quickening pace of reform this year has not derailed this trend. The entire industry has already donated $422,000 this year, and 69 percent of this total has gone to Democrats. MFA ranks second behind HBK Capital Management in terms of contributions.

Senate Majority Leader Harry Reid (D-Nev.) is the leading recipient of hedge fund cash so far this cycle. New York's two Democratic senators, Charles Schumer and Kirsten Gillibrand, rank second and third. Last cycle, then-Sen.Obama hauled in $1.3 million from the industry, more than double the receipts of his opponent, Sen. John McCain (R-Ariz.).

Democrats in both houses of Congress are being tested by the White House's plans to overhaul Wall Street. Today's Politico profiles five Democratic legislators who have critiqued elements of the Obama administration's reforms. The group includes Rep. Melissa Bean (D-Ill.), Rep. Walt Minnick (D-Idaho.), Rep. Michael McMahon (D-N.Y.), Sen. Mark Warner (D-Va.), and Sen. Evan Bayh (D-Ind.). The securities and investment industry ranks at least third in terms of all-time donations for each lawmaker, except McMahon.