Will Private Equity Stay With K Street?

Private equity firms and K Street lobbyists have spent this congressional session in the throes of a beautiful romance. With the Democratic majority publicly considering a major tax hike on record private equity earnings, private equity ramped up a previously anemic lobbying presence, spending more than $5 million so far this year to defeat the proposal.

Today, The Washington Post reports that Senate Majority Leader Harry Reid says the proposal probably won’t make it to the Senate floor because of a crush of complicated proposals competing for floor time. So what does that mean for K Street? Will the Private Equity Council, The Blackstone Group, The Carlyle Group, and other big private equity interests cut back on their lobbying contracts and slow the flood of money that has poured into K Street?

No one is saying yes to that yet. Sources interviewed by Legal Times today declined to comment on the record, citing furor stirred by the Post story. But a source with inside knowledge of the private equity lobbying effort wouldn’t rule out eventually cutting back on outside lobbyists if the tax hike battle really does die down. Another source at a firm working on the private equity effort said the firm expects client needs to be cyclical. In other words, happy clients will be back even if they leave for a while. And there are always others who need something.

Still, it’s unlikely that private equity will reduce its presence to pre-2007 levels. The Private Equity Council, which was established last spring, will remain. The Blackstone Group has been a client with Ogilvy Government Relations for years, though its spending hit a stratospheric $3.74 million in the first half of this year. And Washington-based Carlyle Group hired Covington & Burling partner David Marchick last month as a managing director and global head of regulatory affairs for the firm. He’ll head up in-house lobbying efforts.

In short, private equity may roll back its takeover of K Street -- but it isn’t likely to pull out quite yet.