Vesco managed to take control of IOS, including the unregulated mutual funds, insurance assets, and real estate equity, after eventually evicting Cornfeld from the management.

For instance, the two leaders have sole control over "member items," virtually unregulated funds - $150 million this year - that legislators distribute to favored groups in their districts.

Hedge funds are unregulated private funds that cater to the wealthy and to institutions like college endowments.

The comment letter from the Investment Company Institute, also dated Feb. 10, cited numerous recent examples of fraud and financial shenanigans in unregulated funds.

Several commissioners, whose job it is to police public financing of campaigns, defended the use of unregulated funds.

They also said they would favor requiring that the parties make public disclosures of their unregulated funds.

The bill, sponsored by the Democratic leadership, would prohibit political parties from funneling these largely unregulated funds to benefit candidates for Federal office.

Rather, such funds were undisclosed, unregulated funds raised for independent expenditures, political party "soft money," and a non-Federal political action committee.

Before McCain-Feingold, vulnerable incumbents like Mr. Shays faced two significant dangers to their re-election: the first was so-called "soft money," the unregulated funds allowed for party building.

Mrs. Elliott, a former official of the American Medical Association's political action committee, said that the commission once considered strengthening its murky rules on unregulated funds.