(Reuters) – Federal Reserve Chairman nominee Ben Bernanke said on Tuesday that hedge funds were “a positive force” in the nation’s financial system but the U.S. central bank needed to monitor theiractivities.
Responding to questions from Democratic Sen. Paul Sarbanes of Maryland before the Senate Banking Committee, Bernanke said that hedge funds were far more sophisticated now than was the case when Long-Term Capital Management collapsed in 1998.
“I think it’s important not to be complacent. It’s important for the Federal Reserve to be aware of what’s going on in the market,” Bernanke said. “Nevertheless….the hedge fund industry has become more sophisticated, more diverse, less leveraged and more flexible in the years since LTCM.”