Why Hedge Fund Managers Hate Obama

In May 2007, when Barack Obama was but an upstart challenger of Hillary Clinton, he attended a gathering of several dozen hedge fund managers hosted by Goldman Sachs at the Museum of Modern Art in New York. It was not a fund-raiser, just a chance for Obama to introduce himself to the investment wizards who had helped turn the hedge fund sector into the most lucrative and alluring corner of the financial universe. And the first question for Obama was as blunt as one would expect from this crowd. “If you’re elected president,” asked one guest, “what will you do to the taxes on the people in this room?” “I’ll raise them,” Obama fired back. “Which I admired,” recalls one of the attendees, Leon Cooperman, head of Omega Advisors. “And half the guys in that room voted for him.”

Obama surely knew that brusque candor would serve him well. He had gone to college and law school with these hyper-successful types and had raised money from some of them for his 2004 Senate run. He proceeded to rake in large sums from them for his presidential effort—$1.5 million, more than double John McCain’s take. This was in part because savvy investors like to pick winners, and, as the race developed, Obama’s campaign looked like a winner. But many fund managers also felt a personal connection with Obama. Just as they had carved out a successful niche within finance by thinking big and against the grain, Obama had risen by promising to transcend conventional bounds of race and politics. “They loved the guy,” says a Washington lobbyist who has represented the hedge fund industry. “He was an exciting, bright guy—like they are. He went to the best schools because he was the best student, not because daddy got him in there. Many of them are the first generation to have wealth, and they view it from a meritocratic standpoint—they made a phenomenal amount of wealth and they feel they earned it. They felt that he’s earned his success as well. It resonated with them.”

Four years later, that bond is broken. The hedge fund community has overwhelmingly shifted its backing to the Republicans: Mitt Romney has so far outraised Obama by a four-to-one ratio among hedge fund employees, pulling in more than $500,000—not to mention the seven-figure checks his super PAC has received from several top fund managers.

It makes sense that Obama would lose support from traditional Wall Street. The banks feel aggrieved at having been singled out for blame for the financial collapse—above all in the Dodd-Frank law, which is already crimping their profits. But Obama’s deep unpopularity in the hedge fund world is harder to figure. For one thing, hedge funds may actually benefit from Dodd-Frank. They will have to register more information with regulators—a departure for an industry defined since its beginnings in the late 1940s by its exemption from oversight—but they could also get new business as a result of restrictions on proprietary trading by banks. For another, while the hedge fund sector has shrunk since the crash, the top 40 managers still made $13.2 billion combined last year. And yet, the antipathy that many fund managers are now exhibiting toward Obama is more intense even than what he is facing from bankers. “They hate him now,” says one former Obama administration official.

Trying to trace this shift of support leads one deep into the collective mindset of an industry that defined pre-crash America like no other—into a complex web of motivations where political philosophy, self-interest, and ego intersect. The lobbyist, for one, chalks it up to a romance gone bad. “A lot of people’s love of Obama was not completely balanced, and their dislike of him now is not completely balanced,” he says. “Maybe that’s what happens when you fall in love.” Bill Daley, who served as Obama’s chief of staff last year, attributed the hedge funders’ change of heart to a failed “leap of faith.” “The 2008 campaign was something that a lot of people who had traditionally not been supportive of a Democratic candidate came to,” he told me. “They were tired of Bush and nobody was really enthusiastic about McCain, ... so they attached to the president. What he said in the campaign wasn’t that dramatically different than what he ended up doing, but they either didn’t listen, or they didn’t believe him.”

Omega’s Cooperman (who wound up backing McCain in 2008) put the shift in more caustic terms. Many of his fellow masters of the universe had been snookered by Obama, he argues. Obama’s election “was wonderful for the minority and black population, but in my opinion he’s been the worst president in history.” He added that a mantra has been making the rounds among fund managers lately: “If you voted for Obama in 2008 to prove you’re not a racist, don’t vote for Obama in 2012 to prove you’re not an idiot.” The more people in the hedge fund world whom I talked to, the more visceral critiques that I heard, the more I began to suspect that what had happened was not purely rational. The revolt of the hedge funders, it turns out, is a phenomenon that goes deeper than finance or politics.  

THE FIRST HEDGE FUND manager to break very publicly with Obama was Clifford Asness, the holder of a doctorate in economics from the University of Chicago who, to the dismay of his professors, quit a promising career in academia and went on to found AQR Capital Management, a fund that manages $16 billion. Asness leans libertarian, but gave generously to the Democrats in 2006 and 2008, including a maximum personal donation of $2,300 to Obama. But, just months into Obama’s presidency, Asness flipped—hard. After Obama chastised hedge funds for refusing the administration’s offer to Chrysler bondholders as part of the auto industry bailout, Asness fired off a testosterone-fueled public letter in early May 2009 attacking Obama’s “backwards and libelous” remarks. “This is America,” he wrote. “We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.”

Last July, a Rutgers business professor spotted Asness dining with Republican Representative Paul Ryan at Bistro Bis on Capitol Hill. The professor, Susan Feinberg, couldn’t resist going over to their table and asking Ryan how he could reconcile ordering two $350 bottles of Pinot Noir at a time when he was proposing to slash safety-net spending. Ryan mumbled a response—“Is that how much it was?”—but Asness tore into Feinberg, capping his rant with a “fuck her.” “He seemed genuinely pissed off,” Feinberg told me. “He started keying up the rhetoric—‘You go and tell your liberal friends ... .’ Doing that thing where you point your finger really hard.” Asness remains aligned with the left on social issues—last year, he gave heavily to the gay marriage cause in New York. But, otherwise, he has shifted his political giving entirely to the right, including a $30,800 check to the Republican National Committee in October.

Given Asness’s libertarian leanings, perhaps it was inevitable that Obama would eventually arouse his ire. But the president has also fallen out of favor with hedge funders with whom he has a more personal connection. Take Ken Griffin, who runs the Chicago-based Citadel, a behemoth with hundreds of employees and more than $12 billion under management. Griffin was the ultimate wunderkind. He was still a teenager when he started a stock-trading partnership with a computer salesman in Boca Raton—a man whom his mother had asked to tutor Griffin on his new PC—and he set up a satellite dish atop his Harvard dorm to keep trading there. “He’s way smarter than [Mark] Zuckerberg,” the former salesman, Rush Simonson, told me. Over the years, Griffin had established himself as a major figure on the Chicago scene—among other things, he and his wife donated $19 million for a new wing at the Art Institute of Chicago (and Griffin plunked down $80 million for a Jasper Johns of his own). He played both sides politically, but, when his state’s new senator decided to run for president, Griffin’s hometown pride kicked in. He invited Obama to speak to Citadel employees and raised tens of thousands of dollars for him. (As you might expect, he also hedged his bets by raising some money for McCain.)

"Hypersensitivity", hell. When you use terms that are demeaning and offensive to a whole category of people, people in that category are going to get offended even if you aren't talking about them personally--because you are showing what you really feel about people like them. If one of these guys had publicly called Obama a n****r, you could be sure that it wouldn't just be Obama taking offense, it would be a good percentage of this country's black population, and we would all understand why. That is why, unless you genuinely hate rich people for being rich and are not afraid to openly say so, you never use phrases like "fat cat".

Incidentally, if you are thinking of responding to me that bl ... view full comment

"Hypersensitivity", hell. When you use terms that are demeaning and offensive to a whole category of people, people in that category are going to get offended even if you aren't talking about them personally--because you are showing what you really feel about people like them. If one of these guys had publicly called Obama a n****r, you could be sure that it wouldn't just be Obama taking offense, it would be a good percentage of this country's black population, and we would all understand why. That is why, unless you genuinely hate rich people for being rich and are not afraid to openly say so, you never use phrases like "fat cat".

Incidentally, if you are thinking of responding to me that blacks and rich people are fundamentally different kinds of categories, such that one is morally blameless and the other isn't--well, hedge fund managers don't think that way, and if we want to understand their behavior we have to understand how they think, not how you think.

For all Obama's vaunted empathy and social ability, he never seems to have internalized that not everyone considers being rich, or even being rich while others are not, to be something to feel bad about. There are many, many rich people who no more feel guilty about being rich than a Hindu feels guilty about not going to church on Sunday. You can't just slag off on them and expect them to take it because they think they have it coming, because they don't. You can't just personally insult somebody and then expect them to brush it off as mere tactical maneuvering.

And that is especially true when you are connected to them on an emotional level rather than a logical one. I didn't see one single complaint from Team Obama in this article about how unfairly irrational these guys were being when they were supporting the president. They were happy to benefit from the irrational behavior of hedge fund managers as long as it was in their favor; they have no right to complain about it now.

@hashmalum

Really? Do we all need to engage in some sort of national exercise not to hurt hedge-fund managers feelings? is 'Fat Cats' really all it takes to send them into an emotional tailspin? Perhaps Dodd Frank should have contained a provision that hedge fund managers enroll in mandatory self-esteem training workshops. I think there are more pressing national issues that require our attention and efforts. Perhaps this sliver of the population needs to get out to mainland a little more often.

Re-read the article. What Obama said/did was mild MILD. Clearly these guys live in a bubble and pout, sulk and throw macho-man temper tantrums if they are met with anything short of genuflecting and ... view full comment

@hashmalum

Really? Do we all need to engage in some sort of national exercise not to hurt hedge-fund managers feelings? is 'Fat Cats' really all it takes to send them into an emotional tailspin? Perhaps Dodd Frank should have contained a provision that hedge fund managers enroll in mandatory self-esteem training workshops. I think there are more pressing national issues that require our attention and efforts. Perhaps this sliver of the population needs to get out to mainland a little more often.

Re-read the article. What Obama said/did was mild MILD. Clearly these guys live in a bubble and pout, sulk and throw macho-man temper tantrums if they are met with anything short of genuflecting and sycophancy. When Anthony Scarmuci (the hedge fund guy mentioned in this piece) asked Obama when he was going to stop treating wall street like a 'PiΓ±ata' John Stewart was met with roaring applause when he responded with the line 'I don't know, maybe when the fucking candy comes out?' on the Daily Show. THAT is what these guys need to understand about the American populous rather than the other way around.

http://www.thedailyshow.com/watch/tue-september-21-2010/meet-the-depressed

Obama clearly and calmly explaining his 'Buffet Rule' rationale for his stance towards these 'Masters of the Universe' and even calling them 'Fat Cats' is nothing NOTHING.

This article just moved my dial a couple of ticks back towards 'Fired Up', where it hasn't been for some time.

Excellent article, Alec. You've exposed these whiners for what they are--spoiled brats who are obsessed with money to the exclusion of all else. Poor little, oppressed babies. Maybe they should clutch their copies of Atlas Shrugged (which is, indeed, their Bible) and retreat to a cave somewhere with John Galt, where they will rake in only $1 billion per lifetime, instead of per annum. My heart would bleed for them, if only I knew their pain.

Ben Bernanke and Obama saved us from the Great Depression. The Hedgies put their money in the right place in 2008. And now they want to take it back. I didn't know until I read this article how much childish insecurity is involved in hedging bets i ... view full comment

Excellent article, Alec. You've exposed these whiners for what they are--spoiled brats who are obsessed with money to the exclusion of all else. Poor little, oppressed babies. Maybe they should clutch their copies of Atlas Shrugged (which is, indeed, their Bible) and retreat to a cave somewhere with John Galt, where they will rake in only $1 billion per lifetime, instead of per annum. My heart would bleed for them, if only I knew their pain.

Ben Bernanke and Obama saved us from the Great Depression. The Hedgies put their money in the right place in 2008. And now they want to take it back. I didn't know until I read this article how much childish insecurity is involved in hedging bets in the market. I thought the business was involved, economically and politically, with the science that adults practice. And, scientifically, Obama is much more qualified to keep our economy from crashing again than any Republican ever will be. If he's re-elected, these crybaby Hedgies will be able to play their hocus-pocus money games and be in much less danger of losing everything than they would be under a Republican president. But they won't thank their benefactor. Spoiled children don't do that. They live in a fantasy world of victimhood.

That should read "...the Great Depression II."

That should read "...the Great Depression II."

I am reminded of a hoary old joke.

A rich man dances with a beautiful woman at a party. While they dance, he asks, "Will you go to bed with me for a million dollars?"

Giggling at the absurdity of the question/offer, she replies, "Well, sure. If you have a million dollars on you in cash, I'll go into that bedroom upstairs with you."

He then says, "Will you go to bed with me for a hundred dollars?" He pulls out his wallet and opens it to reveal several twenties.

Indignantly, the babe replies, "No! What kind of a person do you think I am?!"

The rich dude sneers, "We've already established that. Now we're just dickering over the price."

If the woman in the joke had said, "No" ... view full comment

I am reminded of a hoary old joke.

A rich man dances with a beautiful woman at a party. While they dance, he asks, "Will you go to bed with me for a million dollars?"

Giggling at the absurdity of the question/offer, she replies, "Well, sure. If you have a million dollars on you in cash, I'll go into that bedroom upstairs with you."

He then says, "Will you go to bed with me for a hundred dollars?" He pulls out his wallet and opens it to reveal several twenties.

Indignantly, the babe replies, "No! What kind of a person do you think I am?!"

The rich dude sneers, "We've already established that. Now we're just dickering over the price."

If the woman in the joke had said, "No" to both questions, perhaps the rich dude would be as offended and surly as the hedge fund managers.

It's rare that I have any connection to any of these goings on (especially in comparison to many other of the "elite" who subscribe to TNR and post here), but in an oddly and obscurely parallel sort of way there is a similar difference between Paul and Mary Gates in comparison to Paul Allen, and this is something (in a very slight way) I can speak to (very slightly) because of personal experiences and contacts.

I recently bought some electronic cables and equipment manufactured in China, which contained (in the smallest possible print) warnings about lead contamination. So when I hook up the cords, I frequently wash my hands. Perhaps even when you read comments and news stories about these hedge fund managers, it might be a good idea to wash your hands (just to be on the safe side).

"There are many, many rich people who no more feel guilty about being rich than a Hindu feels guilty about not going to church on Sunday."

Hey, hashmalum, it's nice to be confirmed in one's impression that for some people money is their religion. Thanks!

But nobody is asking them to feel guilty about being rich. They are being asked to pay their way, as everyone else does, in a society whose structures and institutions enable them to enjoy being rich. To think about the bigger picture, in other words.

"There are many, many rich people who no more feel guilty about being rich than a Hindu feels guilty about not going to church on Sunday."

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