Treasury Secretary Tim Geithner announced a new regulatory model for the financial system that includes regulating hedge funds for the first time. In the past, hedge funds have largely escaped government oversight in the form of regulation and have been warded off legislative attempts to regulate them by leaning on powerful friends.

During the 2008 cycle, hedge fund campaign giving skyrocketed to $16.8 million–an increase of approximately 400%. Three of the top four recipients are predictable, Barack Obama (1st – $1,316,436), Hillary Clinton (2nd – $760,400), and John McCain (4th – $605,750), all major presidential candidates. The third largest recipient of hedge fund money was Banking Committee chair Chris Dodd, receiving $705,450 from the industry. Recently, Dodd has made overtures towards regulating hedge funds and other financial groups currently outside of the regulatory framework, calling the age of “don’t ask, don’t tell,” in the financial world, over.

The only other significant lawmaker to have received large sums from the hedge fund industry is Sen. Chuck Schumer, the long-time protector of the financial services industry and supporter hedge fund deregulation. Schumer received $344,600 from hedge funds over the course of his career.

The debate over Geithner’s new regulatory framework will be intense and it would be important to keep your eyes on the powerful Senate duo of Dodd and Schumer to see what they support and what they oppose. They have some powerful friends and Dodd might need their financial support in his tought reelection race next year.