Big banks, bailout inspire runs for Congress

NEW YORK (Reuters) - Wall Streeters are far from popular these days, but a hedge fund lawyer and a money manager running for Congress hope voters will support their calls to ban bailouts and put an end to "too big to fail."

Christopher Paige, 38, recently announced plans to run against Democratic Representative Paul Kanjorski in eastern Pennsylvania. He is an academic and lawyer who worked the past three years as general counsel for Paige Capital Management, a small New York City hedge fund co-founded by his wife, Michelle.

Paige's move comes a couple of months after Euro Pacific Capital Inc's Peter Schiff, a money manager who as early as 2006 predicted the housing bubble and financial meltdown, formally announced plans to run against Connecticut's senior senator, Democrat Chris Dodd.

Paige told Reuters on Wednesday he was frustrated by the massive cost of bailing out badly behaving banks as well as the vilification of hedge funds. He says lawmakers like Kanjorski, who has represented the state's 11th District since 1984, bear responsibility for last year's banking crisis.

"This country really needs help and, as the bank bailout showed, Congress lacks financial acumen," said Paige, a lifelong Democrat who switched parties to run as a Republican. "We need a few people down there who know what they're doing."

The 11th district includes the Poconos area and the city of Scranton, a blue collar area with above-average unemployment.

Paige says he can bring financial expertise that is rare on Capitol Hill. Before joining the family business, he earned a law degree and worked for years at Pace Poll, a Pace University research unit that explored community involvement.

SCHIFF

Schiff gained fame for publicly forecasting that the housing market was heading for a crash and that financial markets would crumble, predictions that were mocked in 2006 and 2007. In an appearance on Comedy Central's Daily Show this June, he told a national audience he was weighing a run.

Schiff, in a phone interview Wednesday, said he is outraged by Washington's missteps before, during and after the crisis.

"Everything we're doing right now in the name of solving our problems are making them worse," he said. "The people who created the problem are now exacerbating the problem in their foolish attempt to solve problems they don't understand."

Schiff argues more banks should have been allowed to fail, and that the cost of the federal bailout together with President Obama's stimulus spending, will ultimately cost Americans more by fueling massive rates of inflation.

"Someday people may think, 'Thank you, Obama,' because their house stopped falling in value, but they'll have to sell it anyway because they can't afford the electricity," he said.

It remains to be seen if people linked with the capital markets can win political office. Paige's campaign this week appealed to contacts in the hedge fund industry to provide financial support for his campaign.

Paige says hedge funds have been unfairly blamed for the financial crisis and erroneously lumped in with Bernard Madoff, who did not run a hedge fund.

Kanjorski sponsored a bill approved by the House Financial Services Committee on October 27 that will require hedge funds of $150 million and more to register with the Securities and Exchange Commission. Hedge funds for years have railed against efforts to clamp down on the lightly regulated industry.

That hands-off approach does not fully extend to the global banks. Paige said the banks that nearly dragged down the country are not capitalist institutions, but companies created and nurtured by explicit and implicit government subsidies.

Among other measures, Paige said he would like to see a new rendition of the Sherman Antitrust Act, to break up companies, and to bring back a Glass-Steagall separation of consumer banking from risky capital market activities.

"'Too big to fail' should be 'Too big to exist,'" he said.

(Reporting by Joseph A. Giannone; Additional reporting by Kevin Drawbaugh; editing by Andre Grenon and Tim Dobbyn)