Saturday, November 04, 2006

Professor Snow, Please Finish Your Sentence

Professor John Snow, now chairman of hedge fund Cerberus Capital, thinks government regulation of the hedge fund industry is not wise. Prudent Bear quotes Bloomberg:

'October 31 - Bloomberg (Kevin Carmichael): “John Snow, the former U.S. Treasury secretary named chairman of Cerberus Capital…said investors, not policy makers, are the best regulators of hedge funds. Snow…said he came to favor a ‘lighter’ touch for hedge funds because the industry, which oversees $1.3 trillion in assets, was too big for the government to monitor effectively. ‘The real policing of these pools of capital are the investors,’ Snow said… Any government promise to increase scrutiny would create ‘a real risk of moral hazard that implies, ‘Don’t worry. Now the government is watching over you and there aren’t any problems.’”'

[Original text here.]

I agree with him so far. Now if only the honorable Professor Snow would guarantee us, the people, that we will not be bailing these guys out through the FDIC or some other Fed liquidity-pumping mechanisms, should things turn sour for any of the Professor's friends. No regulation, fine; but don't come crying to us for help down the line.

Titanic
[Thanks to jasonrumney.net for the photo.]

PS: And what's a former Treasury Secretary doing in the hedge fund business anyway? I thought hedge funds were known for their wild and speculative -- and sometimes even noxious -- behavior. I guess the much more conservative occupation of public service must have had him chafing at the bit.

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