Hedge Fund Managers Defend Themselves
Yesterday, five hedge fund managers — billionaires all — appeared before Congress in order to defend their profits and try to stave off regulation. They weren’t attacked nearly as badly as executives of failed companies were (AIG in particular got pretty rough treatment), but they were questioned a bit sternly. Nearly all of them, recognizing that they would have to pay lip service to greater regulation, acknowledged that it was probably necessary. But they were quick to point out that reactionary over-regulation would probably not be a good idea.
My favorite moment, though, had to be Falcone’s defense of his enormous salary. (Although Soros’ shameless shilling for his book was pretty amusing as well.) Even though he did point out that he was making money based on returns to investors, he also intimated that, since he didn’t grow up rich, that was partly a justification for his billions later in life. Um, right. It also seemed sort of like he was implying that because his father made only $14,000, it made him immune to the greed that has swept Wall Street for the last decade. Whatever.
At any rate, some of what was said in the hearing did make sense. Hedge funds probably do need to be regulate, but not over-regulated. And I do like that some of the hedge fund managers recommend that a clearinghouse be set up for derivatives and credit default swaps. If people are going to continue to invest in these things, there should be a more transparent place for them to do it in. I also agree that the wild use of leverage, as well as large risks taken, are major contributors to this financial meltdown — and I suppose it is natural that the hedge fund managers would downplay their roles.
At any rate, I think Simons pretty much summed up the general feeling of the fund managers there:
“In my view, the crisis has many causes: The regulators who took a hands-off position on investment bank leverage and credit default swaps; everyone along the mortgage-backed securities chain who should have blown a whistle rather than passing the problem on; and, in my opinion the most culpable, the rating agencies, which allowed sows’ ears to be sold as silk purses…”
He was smart enough to avoid throwing blame on consumers, though. Despite the fact that they deserve some of the blame as well.
You can see a video of the hedge fund managers’ hearing here.



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