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democratic party as financial instrument; or, capital-gains meritocracy

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Playing ball, one way or another, with the hedge funds outfits, seems to be more or less mandatory for Democratic candidates today. One wonders what would happen to the expected Dem-demographic if the average american actually knew what a hedge fund is, who is allowed to pay to play, and the like.

First, from tomorrow’s NYT, we can be happy to see that Chelsea Clinton has made it to the top all completely on her own and with absolutely no consideration of the fact that her job might keep mom (and dad) on the right side of the capital-gains tax issue.

But after Oxford, Chelsea Clinton signed up with McKinsey, a consulting company known as an elite business training corps. She was the youngest in her class, hired at the same rank as those with M.B.A. degrees. Her interview was more like a conversation, said D. Ronald Daniel, a senior partner. “That’s why she was a good consultant, because we are professional question-askers and professional listeners,” Mr. Daniel said.

Because clients often prefer McKinsey to remain invisible, the work was quiet, allowing Ms. Clinton and her peers to pretend that she was just another freshly hatched graduate.

“When she was at parties with us, she was one of the group,” said Gautam Mukunda, whose office was a few doors down from hers. “From what I know of her father, he has never been in any room in which he was not the center of attention, starting from before he became president. Chelsea has a deeply admirable ability to yield focus.”

Last fall, Ms. Clinton moved on, taking a job analyzing investments at Avenue Capital Group, a hedge fund run by Marc Lasry, a loyal donor to Democratic causes generally, and Clinton-related ones specifically. The company invests its $18 billion in the debt of troubled businesses.

Friends say financial independence is important to Ms. Clinton; she may improve on her low-six-figure McKinsey salary by hundreds of thousands of dollars at Avenue because of potential bonuses, industry headhunters say.

Next, we’ve got a piece from April 2007 about John Edwards stint as a “consultant” at Fortress Investment Group:

Two years ago, former senator John Edwards of North Carolina, gearing up for his second run at the Democratic presidential nomination, gave a speech decrying the “two different economies in this country: one for wealthy insiders and then one for everybody else.”

Four months later, he began working for the kind of firm that to many Wall Street critics embodies the economy of wealthy insiders — a hedge fund.

Edwards became a consultant for Fortress Investment Group, a New York-based firm known mainly for its hedge funds, just as the funds were gaining prominence in the financial world — and in the public consciousness, where awe over their outsize returns has mixed with misgivings about a rarefied industry that is, on the whole, run by and for extremely wealthy people and operates largely in secrecy.

A midsize but growing player in the hedge fund industry with more than $30 billion in assets, Fortress was the first hedge fund manager to go public, thereby subjecting itself to far more scrutiny. But it was an unusual choice of employment for Edwards, who for years has decried offshore tax shelters as part of his broader campaign to reduce inequality. While Fortress was incorporated in Delaware, its hedge funds were incorporated in the Cayman Islands, enabling its partners and foreign investors to defer or avoid paying U.S. taxes.

And finally of course there is the biggest hedge-fundraiser of them all, Barack Obama:

With $32.8 million in campaign contributions last quarter, Barack Obama, the Illinois senator and Democratic presidential candidate, easily surpassed his rivals in both parties. And it seems Wall Street money had something to do with it.

Employees of three big investment banks and one major hedge fund were among the leading sources of cash for Mr. Obama, according to data filed Sunday with the Federal Elections Commission. His contributors during the three-month period ended June 30 included Richard S. Fuld Jr., the chief executive of Lehman Brothers, and Kenneth C. Griffin, president of the Citadel Investment Group.

Citadel, a hedge-fund firm based in Chicago, was a wellspring of cash for Mr. Obama. In addition to the $4,600 he collected from Mr. Griffin — the maximum donation allowed from an individual — other Citadel employees donated a combined $147,550 to Mr. Obama’s campaign, according to the Associated Press.

Bulge-bracket investment banks also gave Mr. Obama a lift. Employees of Lehman contributed $160,760 to his presidential run (which includes $2,300 from Mr. Fuld), Goldman Sachs employees gave $103,550 and employees of J.P. Morgan Chase gave $101,950, records show.

Now, everyone seems to think that the dominant issue here that has the funders and fundees lining up behind candidates is the capital-gains tax issue (basically, when you make money on the appreciation of a good, including investments, you pay taxes at a much lower rate (15 vs. 33 percent) than someone who made their money the old fashioned way, by selling labor in exchange for a wage or a salary. “Strangely,” many of the Democratic candidates have been voicing support for capital-gains tax reform, even if it is, at times, of a cosmetic sort. So what gives? Given the recent chop in the market, and the dawning sense that some very shitty bets have been placed by these organizations, I’m wondering if all of those extremely wealthy Obama-Clinton-Edwards supporters aren’t thinking of something more along these lines

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July 31, 2007 at 2:46 am

Posted in Uncategorized

2 Responses

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  1. Eh, that’s depressing. Especially the complexity — how can the average person keep up with or have any oversight over all these tangled levels of influence if it takes an advanced degree and in-depth knowledge of statistics to follow the money? Gah.


    July 31, 2007 at 11:57 pm

  2. Speaking of Chelsea Clinton:

    There is bad news about her father.

    It is opined that Bill Clinton committed racist hate crimes, and I am not free to say anything further about it.

    Respectfully Submitted by Andrew Y. Wang, J.D. Candidate
    B.S., Summa Cum Laude, 1996
    Messiah College, Grantham, PA
    Lower Merion High School, Ardmore, PA, 1993

    (I can type 90 words per minute, and there are probably thousands of copies on the Internet indicating the content of this post. Moreover, there are innumerable copies in very many countries around the world.)
    “If only it were possible to ban invention that bottled up memories so they never got stale and faded.” Off the top of my head—it came from my Lower Merion High School yearbook.


    March 19, 2009 at 12:42 am

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