Hedge Fund Managers Aren't Hated For Their Money

Politics of envy? What politics of envy?

As Andrew Leonard notes today, both John Edwards and Hillary Clinton were given the softest of softballs last night, when asked about hedge funds in the Democratic debate.

Edwards completely flubbed the answer ("You know, I've been all over the country, organizing workers into unions and raising the minimum wage, and also working at a poverty center at the University of North Carolina"), and Clinton wasn't much better ("What we've got to do here is get back to having a Democratic president who will set the rules, so that we can continue to build our economy, we can inspire and incentivize people to take those risks, but we begin to repair the damage that has been done by this president and Republican Congress.")

Meanwhile, the likes of Marc Lasry, a hedge fund manager who himself says that he makes an "obscene" amount of money, seem to think that hedge funds have an "image problem". Reports DealBook:

It’s easy for regulation-minded politicians to make their case by simply ticking off numbers. Just this week, Institutional Investor’s Alpha Magazine estimated that three hedge fund managers — James H. Simons of Renaissance Capital, Kenneth C. Griffin of Citadel Investment Group and ESL’s Edward S. Lampert — surpassed $1 billion in earnings last year.

Evidently, it really isn't easy for politicians to make that case. As Matt Cooper points out, presidential candidates might be something of a special case, since they're going to be trying to raise a lot of money from hedge-fund managers. But even so, the vast majority of the impetus behind calls for hedge-fund regulation is coming from dry-minded technocrats like Tim Geithner, and not from tub-thumping populist politicians.

There are good reasons to regulate hedge funds, and there are also good reasons not to. Up until now, the debate has remained at a high level, where it belongs. But any complaints from hedge-fund managers about the politics of envy risk turning into self-fulfilling prophecies. As we've seen, there's no sign of such rhetoric thus far.