Soros Warns Lawmakers: Don't go 'overboard' on regulations;
House Committee questions hedge-fund role in crisis;
Report and analysis by Su Keenan of Bloomberg News
November 13, 2008 09:36 am EST
Before the House of Representatives committee on oversight and government reform in Washington D.C. today; George Soros was testifying about congress perception that hedge fund industry as the main factor of collapsing the current financial market.
The House Oversight and Government Reform Committee is attempting to assess the role of hedge funds in the financial crisis. Some lawmakers have urged a new role for hedge fund. It could be a pressing issue under the administration of President-elect Barack Obama. An estimated $2.5 trillion of hedge fund's assets operate mostly outside of government supervision. The Democratic Congressman Henry Waxman said, "Some say hedge funds have become a shadow banking system".
A roughly $60 trillion of credit default swaps actually played a large role in the credit crisis that brought the downfall of Lehman Brothers Holdings Inc. And hedge funds are major purchasers of complex derivatives such as credit default swaps.
The Lawmakers concern that hedge funds operate in a largely unregulated world, and, in part, were able to profit from the collapse of some of America's largest financial institutions.
The following is George Soros' responding to Henry Waxman and others. Via Telegraph:
George Soros, chairman of Soros Fund Management, is predicting 50 – 75 % of the hedge fund industry will disappear in the coming months in any case. Hedge funds will be "decimated" by the current financial crisis, and forced to shrink their portfolios by 50-75 %.
At least one of those hedge fund managers present – Ken Griffin from Citadel Investment Group – is already having a hard time of it. Citadel is experiencing its worst year on record, with two of its funds down by more than 30% year-to-date.
Mr Soros stopped short of placing total blame for the crisis on hedge funds, but he admitted that the funds had been an integral part of the financial market bubble which had now burst.
As a result of that bubble bursting he predicted "a deep recession is now inevitable and the possibility of a depression cannot be ruled out."
He went on to say that US financial regulators, such as the Federal Reserve, should take their portion of blame for the creation of that bubble in the first place, and called for regulation of financial engineering to be a high priority of President-elect Barack Obama's new administration.
George Soros warned against "going overboard" with regulations that could do more damage than good to the financial system. He also criticized the Bush administration's handling of the $700 billion financial rescue program.
A roughly 60% of $100 billion of the hedge funds' losses in October came from investor redemptions.
Related Posts :
Sources :
- Telegraph.co.uk: George Soros called to account by US politicians over global financial crisis, November 13, 2008 09:53PM GMT
The Washington Post: Hedge fund execs have mixed views on oversight, November 13, 2008; 3:36 PM
Bloomberg News Video: Video: Hedge Funds Under Pressure, November 13, 2008 09:36 am EST
This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.
No comments:
Post a Comment