How hedge funds shaped financial reform (Magazine Version)

June 01, 2010   Lawrence Delevingne

An intensive lobbying effort, staffed by Washington pros, helped make the legislation less onerous

By Lawrence Delevingne

On November 19, 2009, Brad Sherman, a Democratic congressman from California, shocked the hedge fund industry. In an amendment proposed to the financial reform bill that the House of Representatives was considering, Sherman added large hedge funds to the group of financial institutions that would have to pay into a so-called Systemic Dissolution Fund to help dismantle failing financial companies and thus avoid more taxpayer bailouts.

Overnight, it appeared that hedge funds with $10 billion or more in assets under management would have to pay into the $50 billion fund. "The hedge fund industry was really caught off guard," says Andrew Lewin, a principal at the Podesta Group, which has lobbied on behalf of hedge funds like Fortress Investment Group. "It came out of left field. They didn't understand why Sherman singled them out; they didn't understand why it moved so quickly through the markup process."



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