Investors must feel that they have fallen "down the rabbit-hole", like Alice, when the heads of some of the largest hedge funds in the US front up to the US Congressional Committee on Oversight and Government Reform and plead for "more regulation". What parallel universe has the credit crisis landed us in?
After telling his "mountain boy made good" life story to the Committee, Philip Falcone, the billionaire co-founder of Harbinger Capital Partners, testified that he supported "greater transparency and better reporting in the hedge fund sector". But, Falcone was not alone, Kenneth Griffin, founder of the Citadel Investment hedge fund, waxed lyrical: "Proper regulation is critical. But the best regulation is created with an eye toward unleashing opportunities, not limiting possibilities."
And I was under the mistaken impression that hedge funds were the bad guys, short selling perfectly good companies into oblivion and chucking fellow Richie Richs, such as Lehman's CEO Richard Fuld, out into the bitter cold of the Hamptons in winter. It turns out that hedge fund billionaires were really good guys after all, just - as Falcone put it - living the American Dream (unlike foreclosed mortgagees, who are living the American nightmare)
George Soros, another billionaire eager to give his opinion to the Oversight Committee and the world in general, (sort of) agreed about regulation telling the House that "financial engineering must also be regulated and new products must be registered and approved by the appropriate authorities before they can be used." And the man in charge of it all, Pushme-Pullyou Paulson, has come around (and around and around), now too believing that regulating hedge funds may be back on the Mad Hatters Tea table.
As Alice remarked: Curiouser and Curiouser?
It turns out that the solution was staring us in the face all along!
What is needed, the hedgies said, is a 'Central Derivatives Clearing House' where decent chaps can exchange contracts over coffee in the company of gentlemen. Where the regulatory Dormouse (Bernanke) can count and count toxic derivatives happily all day until the sacred cows come home. And, where the Tweedledum and Tweedledee of regulation, the Fed and the SEC, can get back to arguing really serious matters, like whose office is closer to the water-cooler?
Some time in the very near future when this new super-duper-super regulatory agency/clearing house/ talking shop moves into its new headquarters [the refurbished Kool-Aid building in Washington], staff and visitors may look up at the Latin inscription over the door - "Venenum in auro bibitur" or as Seneca said "Poison is drunk out of gold!"
Alternatively, people may glance across Pennsylvania Avenue at the Great Seal on the Treasury building, which has been re-chiseled to read "E Pluribus Bunkum".
