As a Republican House member from Louisiana, Richard Baker was broadly respected for his knowledge of the financial industry. Now, as president and CEO of the Managed Funds Association, Baker has put his knowledge of Capitol Hill to work in protecting Wall Street’s interests — lately with impressive results.
Baker’s group, which lobbies on behalf of hedge-fund managers, was involved in shaping two of the major pieces of legislation that have been signed into law in 2012 — the Jumpstart Our Business Startups (JOBS) Act and the Stop Trading on Congressional Knowledge (STOCK) Act. It also remains active in monitoring implementation of the landmark 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
The STOCK Act bars lawmakers and federal officials from knowingly profiting from non-public information related to impending legislation and regulatory decisions. MFA reportedly joined the U.S. Chamber of Commerce in expressing concerns about the regulation of the political intelligence industry. The Senate version of the bill tightened regulations on that industry, but the GOP-led House passed a bill without the political intelligence provisions, which many Republicans protested were unduly burdensome. Rather than negotiate with the House, Senate leaders brought up the House bill and it passed overwhelmingly.
On the JOBS Act, which seeks to make easier for startup companies and small businesses to raise funds, MFA worked to get language in the House version that became law to abolish a ban on the marketing of privately-issued securities. That rule, which dated back to the Depression era, had prevented the hedge fund industry from advertising to the public. The Securities and Exchange Commission is expected to finalize new rules soon on marketing.
Baker has been active on other fronts. He gave a recent speech in which he sought to correct what he called some of the myths surrounding hedge funds. One of them, he said, is that such funds are highly leveraged and risky investments. He highlighted a recent study that shows hedge funds are leveraged, on average, at only 2.34:1 and said that on a long-term, aggregate basis, the funds have outperformed 10-year U.S. Treasury notes, the S&P 500, and STOXX 600 since the end of 2003.
Earlier this month, The New York Times reported that pension funds increasingly have turned to private equity, real estate and hedge funds — but that other retirement systems choosing to continue with more traditional investments in stocks and bonds have performed better for a fraction of the fees. Baker wrote a letter to the editor contending the article contained a number of “misleading statements,” partly because it focused on too narrow a time frame in drawing its conclusions.
Baker, who declined through a spokesman to be interviewed, took over at MFA in February 2008 after 21 years in the House, during which time he chaired the Committee on Financial Services’ Subcommittee on Capital Markets and Insurance. He received a salary of $1.78 million in 2010, which according to First Street amounted to nearly 48 percent of MFA’s lobbying expenditures for that year.
A former real-estate broker, he developed a reputation as one of the most astute members on the Financial Services panel, and was actually a fierce critic of the industry who foresaw the eventual problems besetting government-sponsored mortgage giants Fannie Mae and Freddie Mac.
Baker told National Journal in 2011 that over the last decade, the makeup of hedge funds has shifted from predominantly wealthy private families to large institutional investments from pension funds, endowments and foundations. “This is ratification in my mind of our business model, meaning the way we do things provides real value,” he said.
MFA did about $4 million worth of lobbying work in 2011, according to First Street data. Between January 2011 and March 2012, its political action committee raised nearly $300,000, providing contributions to a variety of lawmakers — many of them members of the Financial Services and Senate Finance committees — on both sides of the aisle.