Wednesday, November 12, 2008
Hedgies in the Hot Seat
So the heaviest of Wall Street Heavies—George Soros, Philip Falcone, John Paulson, James Simons and Ken Griffin—are making their way to Capitol Hill even as we write this.
The five, supposedly chosen because they all made more than a billion last year, will testify before thoughtful and deliberative Congresspersons who really want to learn about this hedge fund business of ours, in order to make sure that Washington regulates the hedge fund industry as intelligently and rationally as possible.
We’re joking, of course.
What those Congresspersons want to do is say as many words as possible before their time limit expires and the Chairman gavels them to get to the point, before they run off to their next meeting.
We know: we’ve testified before one such committee.
On the one hand, it was kind of cool. They were as diverse a group of individuals as you’ll ever get under one roof; about as American as could be. On the other hand, they were, for the most part, blowhards. All it all, it was quite depressing.
The typical “question” went something like this:
Congressperson Sludge: “Thank you, Mr. Chairman, for this opportunity to get at the heart of the concerns of my constituents in the great state of [fill in your average state]. Now, Mr. Hedge Fund Manager, I want to ask about these hedge funds and why these hedge funds are hedging, and what they hedge. Is it not dangerous when so much money is in the hands of so few people with no accountability to the American people, this rabble you’re talking about, who do most of working and paying and living and dying in this town—”
Chairman Bile (banging gavel): Congressperson Sludge, you’re doing Jimmy Stewart from “It’s A Wonderful Life” again. Next time I hold you in contempt!"
Congressperson Sludge: “I apologize, Chairman Bile. What I want to ask the hedge fund persons is but before I get to that let me say that my state is the banjo capitol of the world, and banjos are the backbone of our society, and your corrupt influence on our financial structure should not be tolerated, except, of course, in the event of war—which I voted against, although it seems to me—”
Chairman Bile (banging gavel): Congressperson Sludge, your time is up. [Looking around.] Sludge? Where did he go?
Today’s hedge fund line-up is quite impressive, particularly because Congress finally picked one of the right guys to talk to: John Paulson, who got this whole subprime mess dead right.
Too bad nobody invited him to the table when his namesake, Henry Paulson, and the academic theorist Ben Bernanke, whose main qualification for the job of Fed Chairman seems to be that he studied the Great Depression and wrote a paper about it, were trying to figure out how to deal with the subprime crisis.
If they had, the Feds might not have gone off on tangents like the supposed “naked short-selling” crisis that some Congresspersons actually became convinced was what drove Fannie Mae to ruin.
Of course, just this week, Fannie Mae reported a $29 billion loss. And nowhere in the press release did we see a reference to the “naked shortsellers” who might have caused the loss.
Let’s hope Congressperson Sludge actually asks a real question—and waits around to hear the answer—today. He might learn something.
I Am Not Making This Up
© 2008 NotMakingThisUp, LLC
The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 8:11 AM