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January 06, 2011

The Expanding Influence of Hedge Funds

By CREW Staff

Hedge fund executives spent at least $10 million supporting Republicans during the 2010 midterm elections, a new review by the Center for Public Integrity and NBC News has found. That isn't the only way the industry wields influence in Washington.

The Managed Funds Association (MFA), which represents hedge funds, hired former Rep. Richard Baker (R-LA) as its president and chief executive officer in early 2008.  Since then, CREW's review of lobbying reports shows the MFA has essentially doubled its lobbying spending from the $1.9 million it reported in 2007. In 2009, the group reported spending $3.8 million on lobbying. It has so far reported spending $3.2 million for the first three quarters of 2010. Fourth-quarter 2010 numbers are not yet available, but the MFA looks to be on track for yet another spending increase for the year. The group reported lobbying on a host of issues, including the financial regulatory reform legislation Congress passed in 2010.

It adds up to $7 million on lobbying during the 111th Congress, compared to $4.4 million on lobbying during the 110th Congress- a 60% increase, even with numbers for 2010 still incomplete.

It's impossible to say exactly how much money the hedge funds poured into the midterm elections because so many of the groups that sprang up to influence the campaign in the wake of the Citizens United decision don't disclose their donors. But the $10 million is clearly the tip of the iceberg. Citadel Investment Group CEO Kenneth Griffin made a $250,000 donation to the Karl Rove backed super PAC American Crossroads.  Meanwhile his wife, Anne Griffin, who works at another hedge fund, pitched in another $250,000, according to campaign finance reports filed with the Federal Election Commission. Elliott Management Co. CEO Paul Singer reportedly made a "substantial" donation to American Crossroads affiliate Crossroads GPS, which doesn't disclose donors. He's probably not the only one who took advantage of the anonymity offered by the group.

Meanwhile, the board of American Action Network, the group fronted by former Sen. Norm Coleman (R-MN) that the Center for Responsive Politics reports poured more than $26 million into the midterm elections, includes Dylan Glenn, a senior vice president of New York hedge fund Guggenheim Advisors.

This means the hedge funds will now be focusing their ever-stronger lobbying efforts on lawmakers the industry helped elect, and the public can't be sure just how in debt to hedge funds its new representatives actually are. The industry's influence points to the need for strong campaign finance disclosure requirements in the wake of Citizens United - but will lawmakers backed by the hedge funds be willing to bite the hand that feeds them?

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