Please Explain: Why is Edwards corrupt because he invested in Hedge Funds?

[Mike03]

I want to state my bias up-front: I am leaning towards Edwards (only incrementally more than Obama) now that Biden and Kucinich are definitely out, mostly because Edwards seems laser-focused on domestic policy and because he has stated a "non-negotiable" policy towards Universal Health Care.

But about the Hedge Fund investment; I have some points to make.

1. Many people invest in hedge funds, and because of the ambiguous transparency/non-transparency issues involved in them, investors don't always know what they are invested or not invested in. The portfolio of the funds are not usually public knowledge.

2. Where did this notion come from that hedge funds are primordially evil? Yes, some of them fail, and the Fed bailed out one, against the wishes of many people.

3. Al Gore and Bono of U2 either run, manage, participate in and/or are proponents for these funds! So if we are going to massacre Edwards for making money from investments in hedge funds, let's be fair and massacre Gore, Bono and other liberals as well.

4. Isn't it a good thing that savvy investors like Edwards and HRC make money, so they can afford to run for high political office? Otherwise, since many of you detest them getting money from wealthy liberals, where the hell are they supposed to get their funds???

You expect them to run for president on "humility"?

5. Edwards announced publicly that he would personally divest and disavow his involvement in the funds, specifically the companies that foreclosed on New Orleans families, and that he personally would help any families affected by decisions made by the real estate companies invested in by Fortress.

Many people seem to use "Hedge Fund" as a four letter word, but this is rather preposterous. Would it be out of line to request that people who blindly hate or detest people who invest in hedge funds do a bit of research into what they are, and how varied their portfolios can be?

Peace

[frazzled]

1. I'll just copy the questions I asked elsewhere (and add a bit)

am asking about what he did, legislatively, to fight corporate greed and malfeasance? The insitution of corporate greed and malfeasance.

(Citing court cases is a little bit like saying, back in the 1950s, that you had some black friends while doing nothing to oppose the institutions of racism.)

With regard to corporate greed and malfeasance, I want to know what he has done besides rhetoric?

I really want to know why, if he is so opposed to corporate malfeasance and greed, he has not taken the minimal stand even of removing his $16 million (or whatever insane amount it is) from the Fortress hedge fund .... just even as a symbolic move to protest their tax-evasion in the Cayman Islands and their role in the subprime mess? This would be an easy step for him, to put his money where his mouth is, yet I am not aware that he has removed one penny from this fund.

Just today, in the Business section of the NY Times, there was an article about the obscene compensations that hedge-fund managers received this year (we're talking billions for individuals, not millions). Why has Mr. Edwards not removed his funds from such a hedge fund in protest of such practices?

Why has he not returned the $500,000 he earned while working for Fortress? He claims not to have known they were heavily investing in subprime investments during the time he was there, which means he probably did not take the time to even look at their investments, since it was a hefty portion of their holdings. Which means he didn't earn whatever they were paying him. Which means, as an act of good faith he should return it. (It's a drop in the bucket for him anyway).

I truly am befuddled why I can't, myself, point to a single real thing John Edwards has done that would lead me to believe that he could deal with this real problem of corporate greed and malfeasance. Standing in court or on the soapbox aren't enough for me. I need to see action, and I haven't.

...

Now, as to a few of your points:

1. Edwards was not just an investor, he was a paid employee of the fund for a time. So the transparency issue is probably not entirely convincing here. Should he have known about the huge subprime investments Fortress was amassing while he was there, as a paid employee? That is a question that needs to be asked.

4. You ask whether it isn't a good thing that wealthy people like Edwards can invest in hedge funds so they can run for office. Good question, and one I've been wanting to ask! Why does it seem that Edwards has not spent any personal money on his campaign? John Kerry certainly did, he even mortgaged his house to stay viable; Mitt Romney (jeebus excuse me for mentioning his name), is spending vast amounts of his considerable personal fortune. John Edwards? Not so much. And he could stand to. So of this $16 million or so that sits in the Fortress fund, he has removed not one dime nor spent any of it for the "common good" of his candidacy. He has spent several hundred thousands in contributions that his investment vehicle and former employer contributed to him.

5. Did Edwards divest? I do not think so. But you may feel free to slap me if I am wrong. A portion of some $100,000 (chump change, and not even all from his own funds!) was put into some kind of fund for 34 families, as I read it. That is not acceptable.

[Cameron27]

5. I've been asking the same questions

and have never received a good answer. What's ironic, is that Edwards was protesting against hedge funds in his debate with Cheney, and what, a year later not only invested his money in one, he also went to work for one.

[Mike03]

7. Thank you for this response

Very very good points.

According to Edwards, he did divest, but my source was a talk radio program, so it is in dispute.

Thanks for the thoughtful reply, especially the part about him being more than an investor. That is very vital information, of which I was unaware.

[cali]

2. hedge funds.

Many people invest in hedge funds. Depends what you mean by many people. Roughly, one must have approximately ten mil to even begin to invest in one. Why do they exist? Ever been to Fairfield County CT, Mike? I have. I grew up there. Where are at ALL the hedge funds based? Greenwich, CT.

It's not about hedge funds being primordial evil, as you put it. it's about their purpose: To make quick profits and to shield investors from taxes.

Really? Bono runs a hedge fund. Where is your evidence. And even if Gore and Bono invest in one, does that make it just fine, simply because they do? I'd be glad to criticize Gore and Bono if they invest in certain hedge funds like Fortress. They aren't sacred to me.

No, it's not particularly a good thing that Clinton or Edwards invest in entities that invest in such things as subprime loaners. Why would you think that? Where are they supposed to get their money? From small donors the way Obama has, and the way Howard Dean did. That's where.

Several years ago when my father's private banker suggested that he invest in a hedge fund, my dad threw one of his inimitable fits. He was right. There is a way to invest without being rapacious. Hedge funds are not that avenue.

[Mike03]

8. Cali, thank you for your response

We may disagree, but I always appreciate your posts.

[cali]

13. you are most welicome, michael

and I think it's worth repeating that people posessed of aubstantial wealth can invest without taking advantage. Socially conscious investing has been around for almost a quarter of a century now.

[AngryAmish]

33. Some hedge fund clarification

(I'm sure you know this, but...)

What everyone nowadays calls a hedge fund is in essence a private equity fund. As you stated above, one has to have substantial assets to be a primary investor in one.

"Hedge" funds were created because of the past abuses by mutual funds. Mutual funds are not allowed to short sell (bet a stock goes lower). There is more regulation of mutual funds. With a hedge fund - with the sophisticated investor standard - they can sell stocks short. Thus, they can "hedge" their bet by making sure if they think an investment is going up, but goes down, they don't lose their shirt.

Anyway...

Many people participate in hedge funds without knowing it. Some governmental units put their investment money in hedge funds as well as private pensions. (Dumb and usually corrupt practice because of the payment structure of fund managers - 20% of profits and 2% of value of the investment. Annually. I'll invest never in one for that reason alone.)

Also, all hedge funds do not go for the quick profit only. Arguably there is more pressure on public mutual funds or companies for a quick profit because they constantly have to show results. Harvard's private equity funds (a hedge fund) is famous for long term investing.

All of that said, there are abuses and bad actors out there in hedge fund land. George Soros made his billions with a hedge fund manipulating currencies. They do good in the market by providing liquidity.

Being involved in a hedge fund is not per se evil. Look at each one individually. (And Edwards saying he went to work for one to learn about poverty is just plain silly.)

[BeyondGeography]

3. Because our so-called anti-greed candidate shouldn't be doing anything that looks greedy

and he's a lampoonable rich liberal because of it.

[jillan]

4. It's not that he invests in them, it's the fund he invested in -

Fortress. They made millions off of the poor, and they are also an offshore corporation that does not pay taxes in the US.
That's my issue - but -

You should check it out for yourself and not let people at DU try to sway you one way or the other.

[greenvpi]

6. You're wrong about the "many people" statement

Most are only open to accredited investors. According to the Securities Act of 1933, you have to make at least $300,000.00 per year for each of the past two years if married in order to qualify as an accredited investor. They operate by excluding common, hard-working people. They're made to screw us over. They have even more control over the markets than you would think because they use leverage. That's why we hate them, and that's why we feel betrayed when Edwards decided to use one of these old boys club tricks to screw-over the average person. He came from an average background, and it stings that he has turned his back on us.

[sandnsea]

9. Half his money, millions were invested

and he worked for them. To pretend he didn't know what was being invested in strikes me as highly improbable.

Why do people think Edwards is going to shut down corporate greed when his money, and probably a lot of Edwards' supporters too, is dependent on investment. It makes no sense. The only thing most DUers will boycott is Wal-mart. Ask for a massive switch to responsible investments and almost nobody will take you up on it.

[Mike03]

10. Responsible Investments?

This opens up a huge can of worms, when you try to describe what "responsible" investment is.

People need to be very honest about what the point of investment is before attacking those who invest. This is ridiculous.

[sandnsea]

11. Yes, there are socially and environmentally responsible

funds. Many of them. I find it highly hypocritical of people to run around screaming corporatist when they're retired on money that could have gone to the workers who are being lamblasted for shopping at Wal-mart.

[Mike03]

12. Whatever... I'm not sure how middle class, destitute or naive Democrats are going to be expected

to fix or improve anything in our society, let alone win elections.

And when they lose to fucking republicans, the people here just complain that the Dems were not sophisticated enough to win. "Sophistication" is just a perverse euphemism for money. Everyone knows it.

[cali]

15. you sound terribly defensive here. Have you looked into

socially responsible investing? It's no longer in it's infancy.

[frazzled]

16. We're not talking about socially responsible mutual funds investments

We're talking about hedge funds. You and I cannot invest in a hedge fund. I do have some money in mutual funds. And a good portion of my husband's IRA is invested in so-called socially responsible funds (though one wonders how socially responsible they are). A hedge fund is a totally different animal. You must be incredibly wealthy to invest (millions). They are not under the same regulations as other types of investment funds.

They are instruments for the super-wealthy.

The debates starting up again. Gotta run.

[Mike03]

19. Yes, but Cali...

Yes, you are right, in a sense I am defensive.

But you must recognize why. Socially responsible investing does not make "millionares and billionairs" much money.

[Occam Bandage]

20. So wouldn't you say that irresponsibility for the sake of greed

is...er...corrupt?

[Adelante]

28. Millionaires and billionaires making less money would be socially responsible

That's where hedge funds come in handy. Insulating the rich from social responsibility.

[FrenchieCat]

14. Edwards worked for Fortress......a Hedge Fund and was paid

nearly $500,000 for part time work done over the telephone. On Charlie Rose, Edwards was asked why he did it. He responded, for a salary and to learn about the markets.

So my question is why did Edwards need 1/2 million that badly?
Why was a Hedgefund willing to pay that much to help someone learn?
and
Isn't there a better way to "learn about the Market" than to work for a company that deals in predatory lending practices?

Further, Edwards invested Millions
and the Hedgefunds have donated a large amount of money to Edwards' campaign.

None of this says anything good about the Anti-Corporatist Crusader to me!

[ray of light]

17. just bookmarking to read in the morning when I have more active brain cells.

[Adelante]

30. He paid himself $40,000 a year from his own poverty center

He has his priorities :shrug:

[youthere]

35. What?

Tell me more...I have never heard that before.

[Adelante]

41. Here you go

Edwards launched the UNC Center on Poverty, Work and Opportunity in September 2005, with Hurricane Katrina and the scenes of deprivation it laid bare days earlier giving the venture an unexpected timeliness. The center had a small staff, paid for mostly by several million dollars from Edwards's campaign supporters. It organized a dozen conferences and panel discussions over Edwards's two-plus years there, sponsored a book published last week and explored rebuilding strategies for New Orleans.

Edwards received a salary of $40,000 for work that had him on campus a day or two a week. He spent the rest of his time traveling the country and working as a paid adviser to a hedge fund.

http://www.washingtonpost.com/wp-dyn/content/article/2007/05/06/AR2007050601322_pf.html

[Occam Bandage]

18. Because an anti-corporate crusader probably shouldn't be making money off

the most rapacious form of investment, especially when the particular hedge fund he worked for was investing in predatory subprime lending. It's hypocritical, to say the least.

And it's absolutely ridiculous that Mr. "Two Americas" is making money off a form of high-leverage investment that is only available to the super-wealthy.

[slipslidingaway]

21. Fortress also has investments in Humana, probably other health

insurance companies as well ?, and this might be seen as a conflict if these companies are indeed ready to sell insurance to people who are mandated to have health insurance.

:shrug:

http://www.healthjournalism.org/health-news-details.php?id=98

"...Before 2003 Humana, a regional company peddling health insurance, including HMOs, was hardly a household name. One of its policies had been a big money loser, and the company was struggling to dig its way out of a financial hole. Vice president Steve Brueckner called the MMA "an unprecedented opportunity to establish relationships," and his company made the most of it. Humana gained 4 million new policyholders and reported to stockholders in April that it had amassed "record breaking revenues." What's more, Humana has become a national brand poised to sell policies in the non-Medicare market, where people will increasingly be forced to buy their own health coverage, especially if an "individual mandate" becomes a solution for the country's healthcare woes..."

[snowbear]

22. Chelsea Clinton deals in hedge funds daily at her job

.... So what.

[lisainmilo]

23. They have all ties to hedgefunds, Obama, Clinton included

http://dealbook.blogs.nytimes.com/2007/10/03/hedging-their-political-bets/

http://www.chicagotribune.com/news/nationworld/chi-070725obama,1,5894874.story?coll=chi_tab01_layout



AND

<snip>

So far, there is little indication that things will change in the next administration, given the support hedge fund managers are giving to presidential aspirants of both parties. Democratic hopefuls, including Hillary Clinton, Barack Obama, Christopher Dodd, and John Edwards, as well as Republican hopefuls Rudolph Giuliani, John McCain, and Mitt Romney, have all raised tens of thousands of dollars from hedge funds. Clinton, Giuliani, and Obama all count hedge fund executives as important fund raisers for them. Giuliani considers Paul Singer, founder of the $7 billion hedge fund Elliott Associates, a major policy adviser. Edwards worked for a year as an adviser to the hedge fund company Fortress Investments, but quit when he launched his presidential bid. So far there is little talk among the candidates about hedge funds, except how much they will contribute to campaigns.

<snip>

http://www.prospect.org/cs/articles?article=what_hedge_funds_risk

[FrenchieCat]

24. Did they all work for Hedge funds and invest millions

while screaming at the top of their lungs about how they were going to "fight" the "corporatists"? Didn't think so!

[Yukari Yakumo]

25. Corrupt isn't the word I'd use.

Two-faced is more like it.

Edwards says he'll fight poverty. Meanwhile, he made millions off a hedge fund that foreclosed on homes in NOLA and engaged in predatory practices. Plus, Edwards has done little to nothing with his wealth in regards to philanthropy to fight poverty.

What he says and what he's done are two totally different things. As usual.

[robbedvoter]

26. Not corruption. Hypocrisy. Like with every single stand - he never walks the walk

His words are empty.

[Armstead]

32. If he weren;t walking his talk he'd be sitting back enjoying being rich

The guy has enough money that he never has to work another day in his life. or, if he were truly greedy, he'd be working for a Washington Corporate Law firm, or lobbists' firm, and cashing in.

[robbedvoter]

37. OK, so admire Romney too - he didn't take a salary as governor! Or Dick Cheney

he doesn't have to work either!

[Armstead]

38. That's about the only good thing that can be said about Romney

[ellisonz]

27. Kick.

[Adelante]

29. "make money, so they can afford to run for high political office"

Edwards isn't running on his money - he's running on our money, so I don't get the point there.

[OneGrassRoot]

31. Thanks for asking these questions...

I still support Edwards - in spite of the issues raised here - but I DO want answers from him with regard to this issue. The Fortress issue is his biggest vulnerability and it isn't going to go away. I'd like to understand the dynamics myself.

I would hope those who support other candidates would like some things clarified about their issues/actions as well. No one is perfect and, since the concept of greed and corruption and hypocrisy are rather subjective (unfortunately), those charges can be leveled at every single candidate.

No need for anyone to respond to my post to educate me...I've read the other responses and hear loud and clear why others don't support or like Edwards.

[Clark2008]

34. Kucinich is out?

[Desertrose]

39. Not according to everyone...just certain ones here..

Dennis will be in until the convention- just like before.

Who else do the progressives have really?

[begin_within]

36. Should we also scrutinize Obama's and Clinton's investment portfolios? And didn't Al Gore

own stock in Occidenal Petroleum?

[Desertrose]

40. Not corrupt but certainly appears to be part of the game.

No biggie...just be aware that its a game and Edwards is in at like Clinton & Obama.

Big money basically owns the candidates..DK really is an exception- which is part of why he struggles to be heard.