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In an interview on Bloomberg TV, Treasury Secretary Henry Paulson, when asked whether hedge funds might be eligible for the U.S. plan injecting capital into financial companies he said, "the program right now is for banks and thrifts."
On Monday, the Treasury announced plans to use $250 billion of the $700 billion financial bailout plan approved by congress to buy preferred shares in a number of financial companies in an effort to bolster the struggling banking system and stimulate lending.
USA Today – Markets braced for Wednesday night’s scheduled expiration of the ban on short sales of more than 900 financial stocks, as investment analysts and advisers gave differing predictions on the potential impact.
The emergency ban is set to expire just before midnight, 13 trading days after the Securities and Exchange Commission imposed it with the aim of halting trading the agency said appeared to be "contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation."
The expiration is timed to take effect three trading days after President Bush signed the $700 billion financial system bailout approved by Congress last week. Although the SEC retained authority to extend the ban through Oct. 17, the agency announced no changes Tuesday.
The ban has temporarily halted a legal practice in which traders borrow shares and sell them in the hope of profiting by replacing the borrowed shares with equivalents bought later in the market at a lower price. But it’s illegal to spread rumors or misinformation about a company in a bid to drive down its share price while short selling that firm’s stock.
Reuters – Hedge funds are unlikely to be among financial institutions clamoring to unload their bad debts under a proposed $700 billion Wall Street bailout plan, the chief of the funds’ lobbying group said on Tuesday.
"I think it’s unlikely that they would include us and I think it’s unlikely that we would ask to be included," said Richard Baker, president of the Managed Funds Association.
In an interview with Reuters, Baker said it was still unclear whether hedge funds are among financial institutions that would be allowed to participate in the massive Bush administration plan now being debated by Congress.
The former Louisiana congressman said one thing is crystal clear to hedge fund managers: "We understand that if you ask for benefits from the government, you generally get regulation, whether you like it or not."
Washington Post – Given the panic in Washington over the financial markets, it is virtually certain that Congress will soon pass some form of the bailout plan the Treasury put forward last week. This is not an ideal proposal, particularly since it does not address the underlying problem with mortgages and negative housing equity.
No troubled mortgage holders would benefit directly, and key commercial banks might still end up undercapitalized.
However, no legislator wants to risk allowing the economy to collapse on his or her watch, and, according to Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, that is what’s at stake.
Reuters – The U.S. Labor Department should provide pension plans with guidance on investing in hedge funds and private equity, a report issued by the Government Accountability Office (GAO) said on Wednesday.
The report found that pension plans are investing more and more in alternate investments like hedge funds, which are traditionally less transparent and riskier.
Available data of mid- to large-size plans show that between 21 and 27 percent invest in hedge funds and more than 40 percent invest in private equity, said the GAO, the investigative arm of Congress.
Because hedge funds and private equity investments are exempt from federal regulations that generally apply to other pension plan investments, the GAO recommended that the Secretary of Labor provide greater clarity on the differences between safe and unsafe investments.
Reuters – The U.S. Labor Department should provide pension plans with guidance on investing in hedge funds and private equity, a report issued by the Government Accountability Office (GAO) said on Wednesday.
The report found that pension plans are investing more and more in alternate investments like hedge funds, which are traditionally less transparent and riskier.
Available data of mid- to large-size plans show that between 21 and 27 percent invest in hedge funds and more than 40 percent invest in private equity, said the GAO, the investigative arm of Congress.
Because hedge funds and private equity investments are exempt from federal regulations that generally apply to other pension plan investments, the GAO recommended that the Secretary of Labor provide greater clarity on the differences between safe and unsafe investments.
The Labor Department said it would consider the feasibility of developing specific guidance. But said guidance may be difficult to develop given the lack of uniformity in describing hedge funds, private equity funds and their investments and operations.
RightSide Advisors- Nimbleness and creativity are qualities rarely ascribed either to America’s financial regulators or to Congress. Perhaps that is one reason why both groups continue to fumble over how to deal with hedge funds, which typically exhibit both in abundance. These lightly regulated pools of private capital employ an array of complex trades, frequently shifting strategies and, in theory, generating above-average returns.
The argument for more regulation is twofold. First, nowadays it is not only a few aficionados of the investment world who are exposed to them but a growing number of people—either directly, if they are rich enough, or through their pension funds. Secondly, some hedge funds are so large that a big one’s failure could threaten the financial system.
Politico.com- Sometimes in Washington, stealth is more important than strength.
In recent years, hedge fund managers, who oversee those secretive and lightly regulated pools of billions of dollars of investment capital, have gotten increasingly worried about whether Washington will change tax rules for offshore investors.
Many hedge funds set up subsidiaries in the Cayman Islands and other low-tax locales so their investors can pay lower taxes on a certain amount of their activity. If Congress were to make a grab for that money by changing the tax rules governing the hedge funds, it could generate hundreds of millions of dollars in new taxes at the hedge funds’ expense.
