Lawmakers are indicating that upcoming tough new financial rules will not apply to private investment funds. The US House of Representatives is set to unveil legislation that imposes considerable restraints on banking and mortgage lending. However, members of the Financial Services Committee have said that the final legislation will not apply to hedge funds and private equity funds.
"How can you regulate a hedge fund like a mortgage?" said Committee Chairman Rep. Barney Frank (D-Mass). "It doesn't make any sense. It will need to be a form appropriate to them."
"I spent a lot of days hearing, 'we had nothing to do with the crash,'" said Rep. Jim Himes (D-Conn), a former investment banker. "For the most part, they're right. Part of what we need to do is not hurt those who don't add more risk to the system."
Republican members of the Committee agreed: "A hedge fund that fails just means they made the wrong bet," said Rep. Spencer Bachus (R-Ala). "Hedge funds are not overleveraged."
The Committee's members indicated they expect the final legislation pertaining to private investment funds to include registration and reporting requirements. This would track the Obama administration's proposed rules and the bills currently pending in Congress.
Story: US House Plans Separate Regulations for Hedge Funds, Banks, Bloomberg (August 7, 2009)