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Hedge funds: Scores to settle

Regulators see a chance to hammer hedge funds and are determined to take it.

Once again, regulators and legislators have proved that they know very little about the role of hedge funds in financial markets. Toings and froings about new regulation from both camps are simply a waste of time that could be spent in much more worthwhile pursuits.

European Central Bank president Jean-Claude Trichet’s statement that "the current crisis is a loud and clear call for extending regulation and oversight to all systemically important institutions – notably hedge funds and credit rating agencies" is misplaced.

Think back just a few months to when Dick Fuld railed against the malign influence of hedge funds that were supposedly dragging down Lehman Brothers’ share price. The sellers of Lehman stock, short or otherwise, were right. The bank went bust. As trillions of dollars of losses pile up in the banking system, those that blamed hedge funds really ought to offer up an apology.

Perhaps Trichet can explain exactly what he thinks hedge funds have to do with the banking crisis. If he cannot, perhaps Mike Castle and Mike Capuano of the US House of Representatives can. In the second half of February they introduced a bill to force hedge funds to register, file an annual disclosure form, comply with SEC record-keeping and cooperate with SEC investigations.

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