Here's a fun article on Reuters where our brightest elected officials are questioning whether the SEC should regulate hedge funds - and in fact, whether they have the authority to do so.
Some choice tidbits:
"WASHINGTON, May 16 (Reuters) - Two Senate Republicans on Tuesday questioned whether the U.S. Securities and Exchange Commission had the authority to adopt a rule requiring hedge fund advisers to register with the investor protection agency.
Republican Mike Crapo of Idaho said at a Senate Banking subcommittee hearing that there were legitimate questions about the SEC's authority to adopt the rule and its ability to enforce it.
"While the SEC is an independent agency, it seems to me that it shouldn't be permitted to take the term 'independent' to an extreme," Crapo said at the hearing, which was focused on the state of the $1 trillion hedge fund industry.
Crapo said he hoped the courts would invalidate the new SEC rule, which took effect in February. A hedge fund adviser sued the agency over the rule and the case is still pending before a federal appeals court in Washington, D.C."
Now, I am far from a big fan of the SEC's, but if the SEC lacks the authority to regulate the largest entities in the markets, I suppose one could ask, who does? I mean, isn't it sort of their job description?
Did I miss the stop where the train changed its destination from normalsville to crazzzeeeeeetown?
I really couldn't make this stuff up.
I suppose that these geniuses, who are anti-regulation of an industry wielding more force than many of the world's nations combined, have some way to control and manage the industry? Well, sort of. It's the same experiment that had such a positive conclusion in the Savings and Loan debacle: do away with all regulation and controls, and then see if human nature has changed over the last 20 years.
I mean, it isn't as though we have all of human history to examine for how allowing wildly powerful and rich special interests to operate on the honor system will turn out.
Maybe today's Wall Street, which includes many of the same guys who were on Wall Street during the Milken days, BTW, is different - you know, more fundamentally honest (something Wall Street is renowned for, and which its culture celebrates) and given to self-control than it has been all the rest of its existence.
So why not let the largest, anonymous players do whatever they feel like, and use hope as a surrogate for law enforcement? That seems reasonable to me.
Here's more:
"Republican John Sununu of New Hampshire also questioned the SEC rule adopted amid controversy in 2004.
"We have to ask very basically whether or not the SEC really is the appropriate agency to be undertaking that sort of regulatory requirement," Sununu said.
He questioned one of the SEC's stated justifications for the rule, which is intended to gather information about the loosely-regulated industry. "We shouldn't start crafting regulations in order to gather information so that we can have new regulations. Any way you look at it, that's what the SEC has done."
So, again, what would be the correct body to police hedge funds? The FDA? PETA? The DMV?
I read this, and I'm appalled. What fresh hell is it, where this group of dolts can celebrate the elimination of any safeguards for investors, and float with a straight face the notion that reining in the largest force on Wall Street is a bad idea?
Other countries recognize the multi-national threat posed by hedge funds operating without safeguards. Germany wants more transparency - whose money is that? Where did it come from? Where is it going? Are a bunch of funds operating together to control a market, or launder money?
Then again, this is the same Germany that was so down on invading oil-rich foreign countries on questionable pretexts - they've been spoilsports for a while now. I say we ignore all international feedback, arrogantly dismiss any reasoned debate, and trust that God will lead us in the right direction, while Wall Street holds our hand and our wallet.
That's working so well for us, why stop now?
Wall Street has had the 6 largest years in its history, in terms of profits and bonuses, and yet the markets are essentially flat. Where did all that profit come from? How was it made, given that commissions have never been lower, and that the IPO market is all but dead? Why, could it be from the pockets of investors, whose continued participation in the market is a prerequisite to continued vitality for that sector? And could it further be that the class warfare that was the earmark of the markets in the 1920's has returned - where super-wealthy and powerful pools of money trample retail investors with impunity, while Wall Street pockets the profits?
Nahhh.
If that were the case, we would expect to see two sets of rules in place - one set for the rank and file, and one set for the wealthy and powerful interests. We would expect to see a complete absence of governance of the powerful, and an ever more oppressive clamping down on the sheep.
And that couldn't happen here.
Not a chance.