March 15, 2007
Hedge Funds and Political Contributions
Senator Grassley has proposed a bill to register hedge funds [CR 2845-2846] and Representative Barney Frank is holding hearings on how to regulate hedge funds. The press is linking hedge fund activity to both current stock market corrections, the Asian market drop and the troubles of those in the sub-prime lending market. Then a revealing article in the Wall Street Journal -- hedge funds do not make significant contributions to political parties or candidates. We have a system of informal extortion in place. If a widely successfully company or new group of companies does not get involved (i.e. contribute) in the political process politicians threaten regulation. The threat induces the new company or group of companies to get politically active and join the fray (ie. with contributions). Recall the Microsoft problems of the 90s. Microsoft was attacked by Netscape, using Utah Senators and later the Department of Justice as vehicles, and article detailed how Microsoft had no political cover from political contributions. Microsoft learned. We also saw articles about how Microsoft and its founder did not give enough to charity; they do now. I suspect we will soon see articles about hedge fund managers and their lack of charitable activities.
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