Some fantastic
explanatory reporting
here from Brody Mullins et al, who explain how hedge fund managers bailed on the Democrats. Most of the dispute centers on the failed 2009-2010 effort to pass a sort of millionaire’s tax, under which the sale of hedge funds would be taxed at ordinary rates, not capital gains rates. That was serious money. The bumbling ineffectiveness of Democrats, who proved very good at convincing voters they were socialists while failing to enact any socialism, pissed the managers off.
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.
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.
The shift started near the end of the 2008 campaign, when Mr. Obama began blaming hedge funds for some of the country’s economic problems.
In April 2009, when talks about saving Chrysler through a bankruptcy filing bogged down, the president faulted bond-holding hedge funds for the delay. “They were hoping that everybody else would make sacrifices, and they would have to make none.” Mr. Obama said. “I don’t stand with them.”
That amounted to “bullying,” one prominent fund manager, Cliff Asness of AQR Capital Management, wrote on his personal web page.
What do we know about the hedge funds that have abandoned the Democrats in a huff? Well, AQR was not one of the funds that profited from the financial crisis – it
lost big
. So was Third Point, which lost 33 percent in 2008, and which is
emblematic of the shift
from Democratic to Republican support. The buckshot approach to punishing people who benefited from, or caused, the crisis (hello, Magnetar!) ended up failing while alienating people who had nothing to do with it.
