House panels eye hedge fund reform
Two House committees will be considering whether new regulations should be placed on hedge funds, which are struggling in the current financial crunch. Critics claim hedge fund investors would find a way around such rules. Alisa Roth reports.
A trader works on the floor during the closing minutes of trading at the New York Stock Exchange. (Spencer Platt/Getty Images)
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Scott Jagow: This week, Congress will start looking at the regulation of hedge funds. Marketplace's Alisa Roth has more on that.
Alisa Roth: These are rough days for hedge funds. Like everybody else, they've been flattened by the financial mess. Investors have been pulling out, and there's more talk than ever about regulating the unregulated.
Chris Cutler advises institutional investors on picking hedge funds. He says the right kind of regulation could make the industry stronger. But he's worried Congress might come up with something else:
Chris Cutler: They're not really necessarily experts at what they're asked to regulate. So the risk is that they do things poorly and it's very disruptive.
Critics of hedge fund regulation say that hedge fund investors are savvy, and adding all kinds of rules would just turn hedge funds into high-rolling mutual funds. But Congress is determined to look at the issue.
The House Committee on Oversight and Government Reform takes up the question on Thursday. Meanwhile, the House Financial Services Committee meets Wednesday to look at whether hedge funds can refuse to participate in a government-backed plan to renegotiate mortgages.
In New York, I'm Alisa Roth for Marketplace.
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From huntington beach, CA, 11/12/2008
I thought Hedge Funds were risk neutral, that they had off setting positions so they would eliminate risk; they hedged their positions, thus the name.
I guess regulators and others never saw the Nova documentary "The Trillion Dollar Bet" which explains the math which is the basis for hedge funds and how how the hedge fund Long Term Capital Management failed. FYI - the govt bailed them out.
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