“Lobbying”
What if you could bet on Wednesday’s NBA game between Golden State and Oklahoma City, and before the game or at least before the final buzzer, you could lobby the referees and the league to change the rules? Maybe you would bet on Oklahoma City and then lobby to abolish the three-point shot.
Hedge funds and other investment firms are playing that very game in Washington, D.C., these days. Recently, Capitol Hill has seen a blitz of lobbying on how Puerto Rico should handle its debt amid fiscal disaster, and how Treasury should deal with private investors in bailed out government-sponsored enterprises Fannie Mae and Freddie Mac.
Behind the barrage of lobbying, op-eds and public relations is a handful of hedge funds who have gambled one way or another on GSE stock or Puerto Rican debt, in the hope that they could pull enough strings in Washington to make big bucks.
. . .
Investors allocating capital according to which policy tweaks they think they can win doesn’t sound like the type of capitalism that maximizes economic efficiency. It’s just public-policy profiteering.
As government gets involved in more parts of the economy, hedge funds will increasingly engage in this public-policy profiteering. This will make lobbying on these arcane issues more common and more intense.
So maybe it’s a good time to be long on K Street.
Puerto Rico’s debt, Fannie Mae’s stock, and public-policy profiteering
Ozymandias
Tags: crony capitalism, cronyism, K Street, lobbying, Ozymandias
