Are These House Representatives Bullies?

This article in Forbes.com reports that the Financial Services Committee of the House representatives has summoned the five commissioners in the commissioners serving in the Securities and Exchange Commission for a hearing. the real agenda of the meeting is unclear as it is characterized as an oversight hearing. The representatives appear to be concerned about the profitable operations of Hedge Funds, concerns about Chinese acquisition of publicly quoted firms and the problem with sub-prime mortgages.

This blogger thinks that most hedge funds are run by such sophisticated instruments that the house representatives here are unlikely to make much sense of their operations through these hearings. The ostensible concern about the risks that arise from investment of pension funds into hedge funds could be regulated by the establishment of investment limits or fuller disclosure. bullying SEC commissioners is unlikely to cover whatever risks may arise from highly geared hedge funds and neither is the resort to higher taxes justifiable.

To their credit, it may well be that the legislators are intent on protecting individual investors but that is no reason to seek to punish successful enterprises merely because their business models are not comprehensible to a majority. successful enterprises are built on that fact; accomplishing tasks that other cannot and ensuring that they do not catch up. As for the real risks that a number of hedge funds would fail,I am certain that this law and order approach is less likely to reduce those risks one bit. Let hedge fund managers and investors be.