G-20 Nov 15 meeting: Hedge fund Regulation on the Cards

A lame-duck US president has called a meeting of the G-20 countries to discuss the global financial crisis...and start the process leading to an overhaul of the global financial system.

The underlying problem:

• poor credit decision making in the United states,
• poor credit rating decisions by compromised rating agencies in the United States
• transmission of risk through derivative instruments poorly regulated in the United States
• feed back loop as transmitted risk creates room for more poor credit decisions in the United States
• compromised Accounting firms in the United States with audit standards of a drunk

Solution:

• make believe its a global financial system problem
• use the crisis to prioritize agendas
• bring everything into the ambit of government regulation

The Hedge fund industry has created linkages within the global financial system. Hard working, entrepreneurial, innovative people the world over have access to capital with minimal government intervention. In almost all cases, losses of the hedge fund community are not passed on to the tax payer of the ultimate investor. And their are no complaints, no bailouts, no appeal to the government of the day. These investors know what they are in for ....return can be out-sized but so is the risk.

Faced with such a community, every government feels itself to be an eunuch. Government likes to govern, they want to be needed, make rules...The hedge fund industry simply wants to be left alone to invest and make capital allocation decisions as they see fit..what an abhorrent idea!

So, this Nov 15 meeting can only be about the Hedge fund industry...and how to bring it into the ambit of governments world wide...Let us hope they do not succeed at breaking a good model. See also Global financial Crisis.

However, it seems the Marxist will win the US election so anything is possible.