Bernanke on Tuesday told a hedge-fund conference hosted by the Atlanta Fed that hes sceptical about proposals such as a database of fund holdings that would let authorities monitor risk in the broader financial system. Instead, firms that deal with hedge funds are best equipped to do the job because they have the best incentives.
His comments may not be the last word on the $1.2 trillion industry because the Fed doesnt have direct jurisdiction over financial markets. Thats the responsibility of the Securities and Exchange Commission, whose former chairman, William Donaldson, clashed with Greenspan over a rule to require hedge funds to register with the agency.
They dont want to kill the golden goose, said David Mordecai, president of Risk Economics Ltd, a New York-based investment advisor whose clients include hedge funds. They are trying to determine the proper checks and balances for hedge funds and that may not be regulatory. They are promoting self-policing and self-governance in a positive way.
The comments are consistent with Greenspans views that regulators would probably create more harm than good if they tried to write rules for an industry that thrives on speed and inventiveness.