93 “According to the executive summary, the funds would fall under the purview of a new regulator to oversee business conduct across all financial firms. They would also be subject to information reporting requirements from the Federal Reserve, but its use of that information would only be used broadly when systemic risks in the market emerge.” 94 Many feel that Paulson’s plan does little to change the status quo for hedge funds and private equity firms. Indeed there are those that feel that politics may have played a major role in determining the winners and losers of any regulatory changes. However, I feel that these are purely circumstantial arguments. Yes, it is true that hedge funds donate vast amounts of money to various political campaigns and have in recent years been increasing their presence here in Washington; however, to assume that they are powerful
43 enough to influence the outcomes of a piece of national financial regulation litigation may be a gross misassumption. On the other hand there are those that feel that Paulson’s plan does enough to ensure more stringent capital adequacy requirements for firms using leverage, and that the streamlined approach will allow regulators to be more effective and efficient. 5. Conclusion Throughout this paper I have provided insight and arguments from key stakeholders. In my conclusion I intend to express my personal view points on the central thesis of this paper – regulation. I am a strong believer that the emergence of the hedge fund industry has come as a direct consequence of the sheer genius and added innovation by players in the financial markets. The growth of this “exclusive” industry has proved that the very essence of the capitalistic values that have determined this country’s path to success, still hold true today. It is evident that financial crises are endemic and will always continue to be so (for as long as we embrace our capitalistic values). Since the inception of our financial markets we have experienced booms and busts. The current turmoil we face is no different from the ups and downs experienced throughout the very long history of our financial markets. The notion that a world can just regulate its way out of crises is an illusion. 95 I believe that crisis is the price we pay for innovation and governments face a tough choice of embracing this innovation by keeping markets open or regulating and
44 hampering their innovation. Regulation may provide some form of safety, yes, but it will also destine an economy to a lower rate of growth and even then crisis may strike. I feel that regulation has never proven to be effective in avoiding market turmoil. Consider that the hedge funds have been amongst some of the least affected entities in this subprime mess. However, the very institutions that recorded some of the largest losses ever have been the Citigroups, the UBSs, the Bank of Americas, the very regulated entities that people want hedge funds to emulate.
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- Fall '15