WASHINGTON — More than 40 executives of hedge funds and private equity funds are listed among financiers for Democratic candidates Hillary Clinton and Barack Obama. Most raised at least $100,000, and together they collected as much as $6 million for those two presidential aspirants alone.
Altogether, partners in these loosely regulated industries, which manage trillions of dollars for wealthy private investment funds, have donated more than $10 million to presidential candidates and have even helped enrich at least two of them.
Ronald Burkle, chief of the Los Angeles-based Yucaipa Cos., hosted a star-studded event last year that brought in $2.6 million for New York Sen. Clinton, while her husband, former President Bill Clinton, reaped undisclosed profits serving as an adviser and investor in Burkle’s equity fund. A New York hedge fund, the Avenue Capital Group, hired the Clintons’ daughter, Chelsea.
The New York-based Fortress Investment Group paid former North Carolina Democratic Sen. John Edwards $480,000 in consulting fees before he began his unsuccessful presidential bid.
The funds’ donations represent only a small fraction of the roughly $300 million raised by the Clinton and Obama campaigns. Lawyers, real estate developers, investment bankers and other sectors also have contributed heavily.
One reason why hedge- and equity-fund executives may want to curry favor with potential future presidents is that their industry faces a legislative threat. Bills in Congress would close a loophole that allows fund partners to pay a 15 percent capital gains tax rate on most of their earnings, sparing them the 35 percent rate paid by most high-income Americans.
The industries argue that most of their partners’ income is in distributions from businesses whose value is growing and thus should be taxed as capital gains. But Stanford University law professor Joseph Bankman argues that fund managers should pay the same taxes as “a brain surgeon or an investment banker or a chief executive officer.”
Despite the funds’ donations, both Clinton and Obama have called for closing the tax loophole. Obama’s chief economic adviser, Austan Goolsbee, noted that the Illinois senator “came out for a (tax) policy that was against their interests.”
In addition, calls are rising to regulate the funds more closely in the wake of the subprime mortgage home-finance crisis.
Goolsbee said Obama’s proposal for dealing with the subprime mortgage crisis wouldn’t “bail out the financial institutions.”
Clinton’s chief spokesman, Howard Wolfson, said Clinton thinks it’s time for a review of the “regulatory regime” covering the largely unregulated funds.
The hedge-and-equity-fund industries also have assembled a formidable lineup of lobbyists who last summer helped stall legislation to end the tax loophole. Sen. Christopher Dodd, a Connecticut Democrat who chairs the Senate Banking Committee and whose failed presidential campaign got $1 million from fund employees, was among those who balked at changing the law.