Monday, February 02, 2009
Congress’ New Motto: 220 Years and Still Not Listening!
Legislators Seek Hedge-Fund Disclosure
—by Jenny Strasburg, the Wall Street Journal
Sen. Grassley in a statement last week called for "some sunlight" to be shed on hedge funds and their investors, adding that both groups have fought hard to retain secrecy. The bill he and Sen. Levin introduced also seeks stricter controls to prevent money-laundering through hedge funds.
The first United States Congress opened for business almost 220 years ago—on March 4, 1789, in fact.
218 years later, we were invited to testify before Barney Frank’s House Financial Services Committee, along with several, more distinguished representatives of the hedge fund business.
The subject was, in effect, what should be done about this hedge fund thing.
The Congresspeople asking the questions ranged from the earnestly inquisitive (North Carolina’s Mel Watt) to the fatuously brainless (New York’s Almost-Senator Carolyn Maloney).
Are hedge funds too big?, they asked. What if a big hedge fund failed?, they wanted to know.
Nobody asked about Lehman Brothers, or Fannie Mae, or AIG.
The collective answer from our side of the table was, generally speaking, that while hedge funds were indeed big, it didn’t seem much would happen if a big one failed.
After all, since Long Term Capital nearly brought down the system a decade ago, the hedge fund business had grown so broad and deep that a $10 billion hedge fund (Amaranth) had recently gone down without so much as a ripple—thanks to hedge fund counterparties with the capital and the desire to take Amaranth’s positions, at discounted prices.
The various Congresspeople might have listened to what we said, and could have maybe learned something, except that most were in the room for the time it took to make their statement, look serious for the cameras, and then run out to another meeting.
Which may be why, two years later—after the world financial system has been brought to its knees not by hedge funds but by the investment banks and mortgage providers whose donations helped all these Congresspeople get elected, and re-elected—we find that Congress is thinking maybe it should regulate those darn hedge funds more closely.
So we suggest a new motto for Congress: 220 Years and Still Not Listening!
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 8:25 AM