Complete hedge fund transparency is essential for managing systemic risk, said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. In a press conference last Tuesday, Feb. 3, Frank stated that systemic risk management was at the top of his short-term legislative agenda. When asked about whether he supported the proposed Hedge Fund Transparency Act, he stated that "it's got to be subsumed in everything else." Frank said he erred in backing down on hedge fund regulation in the past, but that the mood then was "overwhelmingly antiregulatory," and that "at this point, we're beyond that."

Frank also said that the "emerging consensus" within the Obama administration was to put the Federal Reserve Board in charge of systemic risk regulation. Frank further indicated that a "general outline" on systemic risk regulation could be expected by April, in time for the Group of 20 nations meeting, but that it would be unrealistic to expect any legislation before then.

The proposed Hedge Fund Transparency Act, which was introduced to the Senate on Jan. 29, would seek to subject private funds and their managers to direct regulation.

Transcript: Available here

Related Alert: Hedge Fund Transparency Act to Increase Government Oversight of Hedge Funds (Feb. 2, 2009) (PDF)