Ezra has a smart post up on the mechanisms of influence that the health insurance industry is using to affect the legislative process. “It’s Not the Money. It’s the Relationships,” he says and includes a chart showing the various former Senate finance staffers who’ve gone to work for the insurance borg.

This is a really crucial point. We have a tendency to understand the economy of influence in DC has almost entirely a product of campaign finance, and the exchange of money. But in my two years here, I’ve been amazed at how much more powerful establishment social networks are. For another (depressing example) of this phenomenon, check out this item from Sam Pizzigatti’s newsletter Too Much:

The Managed Funds Association, the industry trade group, has just hired a well-connected D.C. lobbying firm. How well-connected? Th e firm’s newest star lobbyist, Carmencita Whonder, used to serve as the top financial policy adviser for Senator Chuck Schumer, the powerful New York Democrat. Hedge fund managers are hoping Whonder can save the loophole that lets them claim fee income as a capital gain. Ending this bit of tax sophistry, as the White House proposes, would over double the tax due on hedge fund windfalls. In 2008, the top 25 hedge fund managers averaged $464 million each.

Charlie Cray and I wrote about the scandal of the carried interest loop hole last year. If you want to know why it persists, this is more or less why.