Hedge Fund Antagonist Specter Switches Parties

Apr 29 2009 | 11:06am ET

Sen. Arlen Specter, who once said that he wanted to see hedge fund managers put in jail, joined the Democratic Party yesterday, moving them a step closer to a filibuster-proof majority in the U.S. Senate.

Specter, a former Philadelphia district attorney who was elected to the Senate four times from Pennsylvania as a Republican, will seek reelection next year as a Democrat. For Specter, the move is about political survival as much as anything: He trails a right-wing former Republican congressman in polls, and admitted that “the prospects for winning a Republican primary are bleak.”

Specter has been an outspoken thorn in the side of hedge funds in recent years, railing against both the industry and the Securities and Exchange Commission’s failures to regulate it. In 2006, after the collapse of Amaranth Advisors cost a Philadelphia pension “a lot of money,” he told the SEC’s then-enforcement chief, Linda Thomsen, that he was “interested in indictments, even more interested in convictions, and more interested in jail sentences.”

Since then, he has led, along with Sen. Charles Grassley (R-Iowa) a probe into the SEC’s investigation of alleged insider trading at prominent hedge fund Pequot Capital Management. The duo issued a report blasting the SEC’s investigation, accusing the agency of succumbing to political pressure in pulling the plug on its Pequot probe.

“It’s pretty clear that [former SEC lawyer Gary] Aguirre was fired because he was a whistleblower,” Specter said in November.

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