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Editorial See other Editorial Articles Title: A campaign hedge First published: Wednesday, October 11, 2006 New Yorkers have never been at much of a loss for reasons to demand that the lavish, almost anything goes approach to raising money for political campaigns be replaced with a system that stresses public financing above all. The people able to make such huge donations to politicians in a state where the limits on doing so are more of a joke than an actual regulation have too much influence on the people who get elected to office. Ordinary voters, either unable or disinclined to play that game, are effectively disenfranchised. Then there's the temptation by politicians to spend that money on all sorts of frivolous things, even rewarding themselves and their friends, beyond paying for the already too high cost of campaigns. State law effectively allows it, after all. Now there's another reason to get all that money out of politics. High-risk investments of campaign contributions make public accountability all the more difficult and offer special benefits and access to the people who manage those investments. In the case of Andrew Cuomo, the Democratic candidate for attorney general, an investment of $750,000 of campaign contributions in a hedge fund two years ago paid off nicely -- with a return of almost 20 percent in just a year. It also represents a particularly slippery slope for a business, political fundraising, that already smacks of high stakes. Until now, it's been the accumulation of so much money that's been so aggressive, not the managing of the money. Investment of such funds has been limited to occasional dabbling in the stock market and purchase of mutual funds. No public interest is served by this marriage of the political campaigns and the financial markets. Mr. Cuomo's campaign says the hedge fund it invested in, EnTrust Capital Partners L.P., made no promises that he'd make money on his investment. Because of their lack of regulation and secretive nature, though, many hedge funds open themselves to questions about the nature of the investments. The returns on these investments could even be manipulated by fund managers eager to win the same favor with politicians as high-rolling contributors. In Mr. Cuomo's case, some special arrangements were made, including the waiving of minimum investment requirements by EnTrust, according to a New York Times report. As it happens, Mr. Cuomo is also as committed to sweeping campaign finance reform as anyone on the ballot in New York this year. He speaks of a determination to enforce all available laws to end the culture of pay to play that pervades state government. If Mr. Cuomo wins election this year, this way, it would be nice to see him run for re-election in 2010 as a beneficiary of public campaign financing and free of any conflicts that high-stakes investment of campaign contributions might bring.
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