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The Tory party conference got off to an embarrassing start today after it emerged that the Conservatives have taken large donations from hedge-fund managers whose firms made vast sums of money from taking bets in some of Britain’s crisis-hit banks.
David Cameron, the Tory leader, has accepted almost £2m from hedge-fund managers who took bets on banks such as Halifax Bank of Scotland, which was forced into an emergency rescue by Lloyds TSB, and Bradford & Bingley, which is itself on the brink of collapse.
The practise of taking down bets on shares, known as short-selling, has now been temporarily banned by the Financial Services Authority, the City watchdog, for all bank stocks. However the revelations will be particularly embarrassing for Mr Cameron and George Osborne, his shadow Chancellor, since they both specifically declined to criticise the activity earlier this month.
A string of the hedge funds have been offered membership of an exclusive dining club reserved for backers who give £50,000 or more to the Conservative party.
Cameron has given small dinner parties for members of the so-called “Leader’s Group”, where the donors get to chat in private to the Conservative leader. He has hosted at least one dinner for donors at his home in west London.
The revelations – the subject of a Channel 4 Dispatches programme tomorrow night – are likely to reignite the row over how the Tories are funded and raise questions about Mr Cameron’s personal commitment to transforming the party's image as a haven for the wealthy.
Speaking as he opened his party’s conference in Birmingham, Mr Cameron denied he was steering clear of criticising bankers and hedge fund managers because they contributed heavily to Tory coffers.
"They don't have any influence on my policy at all”, he said. "What matters most of all is safeguarding the depositors in a bank like Bradford & Bingley."
Big donors who are entitled to automatic membership of Mr Cameron’s club include Paul Ruddock, who has donated £259,500 to the Conservatives. He is the co-founder and chief executive of Lansdowne Partners Limited, which has taken tens of millions of pounds in short positions in Halifax Bank of Scotland (HBOS), Barclays and Northern Rock.
The other high profile lender is Michael Hintz, who has given £662,500 and whose hedge fund CQS has shorted shares in Bradford and Bingley.
There is no suggestion that Ruddock or the other Tory hedge-fund donors have done anything improper. His lawyers said yesterday that he had no direct role in the short-selling by his firm and that, anyway, the bets were held on behalf of its clients. The donation to the Conservatives was made by Ruddock personally and has no connection with Lansdowne.
But the disclosure that the Tories are being funded by wealthy businessmen, whose firms aim to make huge profits by betting that the value of shares will fall, will not help Cameron’s efforts to persuade voters that he is the man to guide the country through an economic downturn.

Sam Coates's blog about Westminster, politics and spin
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Same horse, different jockey as they say.
Could it be that Cameron wants to transfer more powers to the Bank of England so that he doesnt have to let down his mates (and his dad) in the city of london
Mark Davies, CARDIFF, UK
The Lib Dems are heavily funded by hedge fund money and I'm sure Labour have donors who have made money from hedge funds. This is not the issue, the real issue is that hedge fund managers are not criminals and we shouldn't care who they give their money to.
Tom, Kenilworth,
I don't see the problem. They have been transparent with their donations as promised. What is more worrying is NuLabour taking donations from the Unions in return for giving them extra power before HardLabour are kicked from office. Now that does worry me.
Phil, Rugby, England
Hedge fund managers are some of the most generous donors in the UK, many have also donated to Labour - to single out the Tories alone is bad journalism. The shorting issue has been over-simpified in the press, and arguably by legislation too. Can't we ditch this populist sensationalism for facts?
Hugh, London, UK
The gross hypocrisy and attempted deceit knows no bounds in the tory mind...............alarm bells of what would become common place if they were voted into power
Eric, Southwick, England
Why is it bad for Davd Cameron to know people who can make a profit even in difficult economic times? These people pay taxes and generate wealth for the nation, while others complain and point fingers.
Klaus Becher, London,
These donors made legal contributions, but since this crisis began correctly asked questions about ethical business practice must be asked. It appears hedge fund executives have naturally worked hard legally to protect their clients funds. It transpires they were too aggressive & have stopped.
B.Garvie, Reading, UK
These donors often are so-called non-domiciles and pay little tax in the UK, their funds are also domiciled in tax-havens and pay just nominal consultancy fees to the UK office which in turn pays little tax but in effect runs all the business. Any coincidence with donations to parties??
Carlos Kleiber, London,
"Brown is absolutely right, no time for novices or ignoranimuses!
sk, East Sussex, England"
Well that's Brown out of the picture then. The sooner we get rid of the red flag brigade the better. Socialism has wrecked our economy since 1997. There's no place for it in the modern world today.
David Charles, Cardiff, UK
Cameron has no idea what his fuel bills are, Clegg doesn't know what the State pension is, Brown is absolutely right, no time for novices or ignoranimuses!
sk, East Sussex, England
Cameron said he would make Tory accounts more transparent, and he has, and he still gets stick for it! I don't see nulabour or the lib dems doing this.
Leave CMD alone to get on with sorting out the country!
Martyn Taylor, Swindon, England
To Ben McPherson. Ben, you're most probably correct in what you state, but what's the difference between the Tories and the current shower that are in office at the moment?
Jim, Brierley Hill,
If anyone really thought for one minute the Tories had genuinelly changed then this should once and for all put paid to any such thought.
Flirting with the Tories will lead to one undeniable fact.
The rich will continue to benefit from elitist policies whilst the rest of the nation pays for it
Ben McPherson, Edinburgh, UK
The very wealthy get to bribe/fund political parties in order to further their own interests.
When are we going to get politicians that are interested in the good of the country.
We need to fund the parties through the state so as to avoid government giving preferential treatment to their backers.
J Whiteside , Lytham,Lancashire, England
Same Old Tories....
Adrian, Leicester, England
Politics have never been puritanical. It's the old adage that money talks and the voter walks. Nothing new really. When we remind politicians we the people are the real power they may begin to listen. Greed is universal be it bankers or politicians
Richard, Canillas de Aceituno, Spain
The Labour party have donors into short selling and so do the Lib dems!Pension funds of every kind use short selling methods and if you have a pension then its likely that income would be 'tainted'! In fact short selling plays a vital role and is being made a scapegoat by 'scapegoats'R'us(nulabour)!
Stephanie King, larnaca, Cyprus