When you swim with piranhas and think they are your friends, well, you'll eventually get a rude lesson. Especially if you do just a little thing to hurt their interests. So, it is with the folks on Wall Street, and, in particular, the hedge fund world: they are pouring huge amounts of money into the GOP.
Here is what we learn today:
Hedge-fund managers made a big bet on Barack Obama and other Democrats in 2008. Now, with the 2012 contest gearing up, some prominent fund managers have turned their backs on the party and are actively supporting Republicans.
This is about one thing, and one thing only: greed. The hedge fund guys just don't like to pay a bit more in taxes:
Managers of hedge funds—private investment partnerships that cater to institutions and wealthy people—are reacting to what some criticize as Mr. Obama's populist attacks on Wall Street, as well as to Democrat-led efforts to raise their tax bills. They had hoped to be protected from such a tax move by their relationships with prominent Democratic members of Congress. "Hedge funds bankrolled the Democrats in the 2006 and 2008 elections, and the very people they helped put in power turned around and screwed them," said Sam Geduldig, a former Republican congressional staffer who is a Wall Street lobbyist.
In one sense, I don't have a lot of sympathy for the Democratic Party or the president. For too long, they have tried to mollify and cozy up to a very dangerous group of people:
Democrats received the biggest share of donations from hedge-fund managers for most of the past two decades. From 1990 through 2008, according to data from the nonpartisan Center for Responsive Politics, fund managers and their employees contributed about $40 million to candidates for Congress and the presidency. About two-thirds went to Democrats.
Who now want to ride a different horse:
But 53% went to Republicans in the 2010 election cycle, when hedge-fund managers' and employees' donations totaled $11 million. GOP strategists credit a core group of fund managers for helping Republicans win control of the House, make inroads in the Senate and drive Mr. Obama toward the political center.
A half-dozen fund managers donated a total of $6 million to the Republican Governors Association in the weeks before the 2010 election and spent millions more to finance a blitz of ads for Republicans running for Congress.
To quote my favorite observer of the behavior of the super-rich, Bill Gates, Sr., "The rich guys don't want to pay the tax." These fabulously wealthy people simply don't want to have their taxes raised, as some people proposed:
The tax bill's writers worried that hedge-fund managers could avoid the highest tax rates by simply leaving their income in the fund, collecting it only when they eventually sold the fund itself. At that point, it clearly would qualify for the capital-gains rate, as profit on a sale of a long-held business. So, the tax bill's writers added a provision saying any profit from the sale of a hedge fund, a private-equity firm or other investment partnership would be taxed at the higher rates that apply to ordinary income.
Fund managers despised that idea. "If you founded a hedge fund, when you sold it you were treated worse than if you owned a peep-show business," said John Raffaelli, a Democratic fund-raiser and lobbyist for the hedge-fund industry.
I do not think it's fair for the lobbyist to denigrate a peep-show. At least when you go to a peep-show, it's all above board and you know what you are going to watch: people getting screwed. With hedge funds, most of that screwing happened without peoples' knowledge.
There are also may be some other self-interest involved here, that of trying to avoid prosecution. I offer the example of Steve Cohen of SAC. Here is what he has done on fundraising:
Last August, Mr. Cohen invited a small group of fund managers to a strategy session in his 32,000-square-foot Greenwich home. The gathering included Republican stalwarts such as Paul Singer of Elliott Management and Dan Senor of Rosemont Capital, but also some more recent Republican donors such as Bruce Kovner of Caxton Associates. The group decided to direct contributions to GOP campaign coffers and to pro-Republican groups that could raise and spend unlimited amounts.
Campaign reports show Mr. Cohen contributed $1.5 million in 2010 to one such group, the Republican Governors Association. The gifts put him among the top four individual donors to the association in a decade, ahead of mega-Republican donor David Koch of Koch Industries. Mr. Cohen contributed to only one Democrat for the 2010 midterm elections, giving $2,400 to Sen. Ron Wyden of Oregon.
Hmmm...wonder if that is connected to another scenario he is
possibly facing:
As the massive insider trading case that is sweeping across Wall Street continues to unfold, it is becoming more and more apparent that the Feds are keenly interested in ensnaring Steve Cohen and his hedge fund, SAC Capital.
The genesis of the ongoing investigation appears to be the arrest of billionaire hedge fund manager Raj Rajaratnam on October 16, 2009. Rajaratnam, who founded New York based hedge fund the Galleon Group, was charged with insider trading. Numerous other high level traders, executives, and consultants were named in the indictment.
One of these people was Richard Choo-Beng Lee, who co-founded Spherix Capital after leaving Cohen's SAC Capital. He has pled guilty to insider trading. Reports indicate that he is cooperating with the Feds, and may be offering up information regarding his time at SAC.
The arrest of Choo-Beng Lee fits in with the modus operandi of the Federal Government. The general idea is to arrest lower level participants in a conspiracy first, flip them, and use the information to further an investigation into higher level targets. In this insider trading probe, the evidence suggests that SAC founder and multi-billionaire trader Steve Cohen is at the top of the government's list.[emphasis added]
Sum up. Look, as people know, I am critical of a lot of the Administration's decisions on economic policy. But, if you want to have one reason, and one reason only, to see a difference between the forces aligning for the 2012 election it is right here: between those people who want to continue to rob the people and keep widening the chasm between rich and poor, who refuse to pay their fair share and who see themselves entitled to continue to pocket a vast fortune while our society's cupboard goes bare and regular peoples' pensions are attacked VERSUS at least people we can have a conversation with, if not convince yet, that there is another way.