Plenty of debate in recent times regarding the unchecked growth of hedge funds and their potential to cause major disruptions to the financial system. It seems that we have not yet learned the lessons from the LTCM collapse.
Bernanke Urges Caution on Hedge Funds
"Financial authorities must stay attuned to any potential risks posed by the growth of hedge funds, an investment domain of the wealthy that has become more popular with smaller investors, Federal Reserve Chairman Ben Bernanke suggested Tuesday."
""Authorities should and will try to ensure that the lapses in risk management of 1998 do not happen again," Bernanke said, referring to the collapse of Long-Term Capital Management, a hedge fund that had received a $3.6 billion private bailout."
"Today some 7,000 to 9,000 hedge funds in the United States command an estimated $1 trillion in assets and are believed to account for as much as 20 percent of all U.S. stock trading."
"Hedge funds - high-risk, largely unregulated and secretive investment pools - have traditionally been the investment domain of the wealthy but have become popular with small investors in recent years."
"The Fed chief suggested that financial institutions and others that do business with hedge funds make sure they are doing all they can to sufficiently blunt their risks. "Continued focus on counterparty risk management is likely the best course for addressing systemic concerns related to hedge funds," Bernanke said."
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This bailout is just one more example of the indivisible handjob stroking irresponsible CEOs and CFOs with billions so that they can run the American economy even further into the ground. So much for Keynesian economics. If the goal is to stimulate the economy, why not give the money directly to the American taxpayers? The government could do twice as much good for the economy by returning half as much money (as the bailout requires) directly to the hardworking American taxpayers. A bird in the hand is worth two in the bush administration.
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