Hedge Funds in Congress

Hedge Funds Gaining Influence on Capital Hill

The hedge fund industry is gaining greater pull on capitol hill, an important development as the financial industry is facing more government regulation.  Hedge funds have some powerful tools at their disposal: A former congressman willing to lobby on the industry's behalf, the potential return on campaign contributions and a strategy of shaping reform in a way that does not harm hedge funds too severely.

After taking heaps of criticism from various public figures, from President Obama to Chairman Ben Bernanke, the hedge fund industry is working to promote friendlier legislation.  Rather than ignoring the political process, hedge funds have taken a more active role by advising the committees and debating the details of any new regulation.  Importantly, hedge funds have reluctantly agreed to a requirement that all funds register with the Securities and Exchange Commission, giving the federal regulators unprecedented access to the hedge fund industry.  An important asset is the new president of Managed Fund Association, the industry's trade group.  Last year, the group hired Richard Baker, a former Republican congressman.  Mr. Baker advocates for a more cooperative but aggressive strategy in molding the new rules.

“We are no longer something that can be ignored by regulators or by the Congress,’’ Mr. Baker told The Globe in an interview. He said many lawmakers know little about hedge funds, leading his organization to address a “dramatic need for education on the Hill.’’

Since his one-year ban on lobbying Congress expired early this year, Mr. Baker wrote, “I have held scores of meetings with my former colleagues.’’ Mr. Baker reported that he was able to “receive a receptive ear.’’ But he warned the hedge fund traders to be vigilant because there is “never . . . a cessation of hostilities’’ in politics.

Mr. Frank, one of the most liberal members of Congress, said Mr. Baker, his former colleague on the Financial Services Committee, has been “a very reasonable guy.’’ Now, as Mr. Frank’s committee meets this week and next to finalize its version of financial regulation legislation, Mr. Baker’s strategy is being put to a crucial test.  Source

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