How Hedge Funds (Secretly) Get Their Way in Washington


James K. Glassman, 71, who said in an email that he stands by his testimony, is a key asset in a furtive campaign by Wall Street to bend the political process. Over the past two decades, hedge funds have grown explosively, with a collective $3.4 trillion under management. Not content to make bets and watch from the sidelines, the largest funds increasingly are trying to steer government outcomes—such as negotiations over sovereign debt—so that their investments are likelier to pay out. When billions are at stake on a given wager, a lobbying campaign looks cheap. But hedge funds know that they’re politically toxic—portrayed by both parties as overpaid plutocrats—and prefer that much of these offensives be conducted in secret. That’s where DCI comes in, providing credible-seeming voices to speak up for the funds’ interests—voices like Glassman’s. It’s not illegal, but it undermines basic principles of transparency and trust.

Since the work is concealed, there’s no way to know for sure how many hedge funds are leveraging Washington to benefit their portfolios. But interviewing insiders and scouring public records, Bloomberg Businessweek identified six major influence campaigns waged on behalf of investors in a particular stock or bond since 2006. DCI, it turns out, coordinated all six.

The campaigns are remarkably similar. Behind the scenes of official Washington, the company repeatedly crafted narratives portraying investors as victims of corrupt governments. DCI rounded up ordinary Americans who agreed with its clients and marched them into lawmakers’ offices to lend a veneer of grass-roots support. Meanwhile, Glassman and other ostensibly independent intellectuals blanketed panels, hearings, and press conferences with the same storyline, without ever mentioning their connection to DCI or the hedge funds. If all went well, the targets of these campaigns—administration officials, media “thought leaders,” and lawmakers—didn’t know they were being lobbied, much less who paid for it.

American democracy is broken.