Hedge Fund Lobby Courting Rep. Baker
Saturday, January 5, 2008
Rep. Richard H. Baker (R-La.), a longtime legislative expert on the regulation of capital markets, is in serious talks to become president of the main lobby for hedge funds, the Managed Funds Association.
Baker disclosed the talks yesterday to the House ethics committee, becoming the first lawmaker to file a report about job talks as required under the lobbying law that Congress passed last year. Lawmakers must inform the House Committee on Standards of Official Conduct, as the ethics panel is officially known, when they start serious negotiations with outsiders that might want to hire them.
Hedge-fund industry executives, who spoke on the condition of anonymity because they were not authorized to talk to the news media, said that Baker is the top candidate for the nearly million-dollar-a-year job and was likely to formally be offered it soon. Baker would have to resign from Congress to take the position.
Republicans have been departing Congress in large numbers lately, at least partly in reaction to the prospect that Democrats are likely to retain control after the next election. At least 19 House Republicans have announced this year that they are leaving.
In addition, several high-profile GOP senators have said they were departing, including Trent Lott (Miss.), who had been the chamber's second-ranking Republican. Lott resigned at the end of last year.
Lott is going into the lobbying business with another former senator, John Breaux (D-La.), and their sons.
In an interview, Baker said he was approached by an executive search firm last month about the job and was careful to disclose the start of detailed conversations. But he said he was not sure that he would take the job.
He said the talks with the association would move quickly now that the disclosure report had been filed with House officials. If he doesn't take the job, Baker said he would stand for reelection this year.
"I've driven by the house and I've seen the 'for sale' sign, but I haven't gone inside to see how many bedrooms or the price," he said. But he added: "The drive by looked very interesting."
A statement by the Managed Funds Association yesterday said it would "begin negotiations with Congressman Richard Baker as a candidate for the president/CEO position." A spokeswoman said John G. Gaine, the association's president since 1997, would stay with the organization after a new president is found. He will concentrate on expanding the group's "global outreach with regulators worldwide, market participants, and other policymakers," she said.
Baker, 59, was elected to Congress in 1986 and served for eight years as chairman of the House subcommittee on capital markets, insurance, and government sponsored enterprises, which has extensive oversight over the financial services industry. Now that Democrats control the House, Baker is a senior Republican on the subcommittee and on the subcommittee on water resources and the environment, a panel important to his home state after Hurricane Katrina.
Baker is well-known for his dogged, though largely unsuccessful efforts to rein in the giant mortgage finance companies Fannie Mae and Freddie Mac. He also pushed initiatives that would limit the authority of state attorneys general.
He has not been a high-profile player on issues dealing with hedge funds. In 1999, he did introduce a measure that would have required hedge funds to disclose more about their operations, but that legislation did not succeed.
Baker created controversy after Hurricane Katrina hit the Gulf Coast in 2005 when he was overheard telling lobbyists: "We finally cleaned up public housing in New Orleans. We couldn't do it, but God did." Baker said later that he did not mean to cause offense with his remarks, but rather that he had long wanted to improve low-income housing in New Orleans.
Hedge funds are multimillion-dollar investment pools designed for wealthy individuals. They have grown enormously in recent years, collecting more than $1 trillion, seizing control of underperforming companies and increasingly drawing money from gigantic pension funds, including those of government employees. There are about 9,000 hedge funds in the country.
For years, they barely registered on the Washington agenda. But now that they are so large and aggressive, federal regulators, state authorities and lawmakers have been clamoring to learn more about them, including whether fraud and risky trading flourish in their secretive operations.
The industry fended off a major tax increase on hedge fund managers last year. The Managed Funds Association, however, has been largely invisible and played little role in the massive legislative battle over hedge fund taxation. Industry executives said that by courting a prominent member of Congress to be its new leader, the association is hoping to step up its Washington activities.