November 7, 2007 (LPAC)--Over the past two years, as Congress began to scrutinize the role of private equity firms and hedge funds, eventually formulating Rep. Charles Rangel's (D-NY) legislation to make the funds' managers pay fair taxes, hedge fund executives were pouring money into Congressional campaign committees and PACs, to keep legislators in line.

In the first nine months of this year, according to the Nov. 7 Washington Post, hedge funds and investment firms have poured $11.8 million into Washington, two-thirds of which went to Democrats. This contrasts with the $11.3 million they gave for the two years 2005-06. Contributions to congressional candidates, congressional campaign committees and congressional leadership PACs total almost $4.8 million this year, well above the $3 million for 2005-2006 combined. Some 83% of this amount went to Democrats, compared to the 53% they received in the last election cycle.

Instructive is the case of hedge-fund giant James H. Simons of Renaissance Technologies LLC, who donated $28,500 in June of this year to the Democratic Senatorial Campaign Committee (DSCC), whose Chairman, New York Democratic Sen. Charles Schumer, was at that time waffling on legislation to raise taxes on private equity funds. Just a few days earlier, hedge fund manager Steven A. Cohen of SAC Capital Advisers, had also given $28,500 to the DSCC. Simons, in total, has given nearly $200,000 to various Democratic committees since last year.

By July, Schumer publicly stated his opposition to the Rangel Democratic legislation to tax the hedge funds, reportedly because they were important to the financial health of New York City. The Post quoted Rep. Barney Frank (D-MA) explaining, "Hedge funds are to New York what tobacco has been to North Carolina. People don't like to tax their constituents."