Thursday, November 13, 2008

Hedgies Have Their Day

Thanks to CNBC, here is a wonderful chart of a summary of the testimony of hedge fund managers today:

Highlights From Hedge Fund Hearing

George Soros:— Crisis Was Generated By Financial System Itself
— Financial System Pricing Somewhat Distorted In Proportion To Actual Problem— Regulators Must Accept Responsibility For Controlling Asset Bubbles
— Controlling Credit Means Using Regulations That Have Fallen Into Disuse
— Financial Market Reforms Must Be International In Scope— Basel Accords Need To Be Replaced By New Rules Reflecting New Paradigm
— Hedge Funds Need To Be Regulated Within New Framework
— Underregulation Helped Cause Current Problem, But Overregulation A Danger As Well
— Hedge Funds Helped Cause Bubble, But Have Been Devastated By Its Bursting

James Simons:
— Rating Agencies Are Among The Most Culpable For Current Problems
— Hedge Funds Were Not A Major Cause of Current Systemic Risk
— Additional Regulation Focused On Market Integrity Would Be Appropriate
— Most Important Step We Can Take Is To Keep People In Their Homes
— More Transparency From Hedge Funds Could Be Helpful
— Any Change In Tax Policy Should Be Applied Equally To All
— PIMCO, Others Should Sponsor A New Derivatives Rating Agency

Philip Falcone:
— Hedge Funds Have Positive Role In Financial Markets
— Compensation In Hedge Fund Business Is Performance Based
— Short Selling Is A Valuable Long Standing Feature of our Markets
— Our Analysts Perform Thorough Due Diligence, Not Relying On Rating Agencies

Kenneth Griffin:
— Champions The Idea of Building Clearinghouse For Credit Default Swaps
— Proper Regulation Is Key To Health Of Financial Markets
— Congress, Regulators, Industry Must All Work Together
— We Must Not Stifle Best Innovative Qualities Of Our Financial Markets

Did they have to testify? All of them clearly had time to prepare the statements they read. Major news outlets are saying that they were "called to testify" before a House committee.
James Simon politely thanked the House for the opportunity to offer comments. He made my favorite quote:

There is much blame to be shared: the SEC and perhaps the Federal Reserve for taking such a hands-off position on the leverage posture of the investment banks and the uncontrolled nature of the CDS market; the players all along the chain of creation and distribution of the paper, each of whom should have blown a whistle rather than passing the problem on to the next guy; and finally, and in my opinion the most culpable, the rating agencies, which failed in their duty and allowed sows' ears to be sold as silk purses.

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