Last week we learned that Goldman Sachs is headed towards its most profitable year ever. Today, Financial News reports that hedge funds are "on course" for their best year in a decade: making "an estimated 9.73 percent in returns for the year to June 24."
What else are hedge funds doing? How about spending more than ever before lobbying Congress to weaken proposed regulations that might hamper their ability to mint money while the rest of us get furloughed, laid off, have our benefits weakened, or take a pay cut? A week ago, the Wall Street Journal reported that the main hedge fund trade group, the Managed Funds Association, spent $750,000 lobbying in the first quarter of 2009, a 14 percent increase over 2008. And 2008 was already a big year:
In 2008, major hedge funds and their trade groups spent $6.1 million lobbying Washington, up from $4.2 million in 2007 and nearly seven times the $897,000 average from 2003 to 2006. The growth rate in hedge-fund lobbying far exceeds the 38 percent increase for the overall financial-services industry between 2006 and 2008, according to figures compiled by the Center for Responsive Politics, a research group that tracks political spending.
Former IMF chief economist Simon Johnson thinks the hedge funds are making a big mistake by pushing back against "mildly reformist" regulatory proposals. His reasoning is that regulatory reform is inevitable, and a stance of resistance could cause "a more focused backlash."
That seems surprisingly optimistic for the consistently dour Johnson. At the moment, hedge funds appear to be emerging from the worst financial crisis in generations -- a crisis in which they played a clear facilitating role, if not the primary instigator -- with their profit-making machinery intact, and their political clout growing in tandem with increased spending. What have they got to worry about?