New York (HedgeCo.Net) – Two senators are pushing for greater regulation of hedge funds, introducing legislation that would call on the U.S. government to oversee them.
Michigan Senator Carl Levin, a Democrat, and Iowa Senator Charles Grassley, a Republican, passed the legislation on Thursday, amidst a much broader attempt by President Barack Obama to vamp up the entire regulatory system. It also comes at a time when the administration is still in talks over how to distribute the remaining $350 billion in the Troubled Asset Relief Program.
“We need to regulate firms that are big enough to destabilize our economy if they fail," said Levin. "It’s time to subject financial heavyweights like hedge funds to federal regulation and oversight to protect our investors, markets and financial system."
The overhaul of the regulatory system is intended to restore faith in an economy that has been shaken by fear. In addition to tighter regulation of hedge funds, the broader plan will include greater oversight of mortgage lenders and credit rating agencies.
Regulation of hedge funds has long been a debate in the financial world. While some push for greater transparency, hedge funds have taken the defensive, saying that they provide plenty of transparency to their clients, with performance reports and other data usually available via a secure website. However, the collapse of many major hedge funds along with the handful of fraud cases has forced the government to try again.
The closest that hedge funds have come to regulation was when they were required to register as investment advisors with the U.S. Securities and Exchange Commission. That requirement was overturned in 2006.
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