Poor, Poor Hedge Funds. Well, not literally, of course, which is why seemingly the only friends the $1.4 trillion industry has are the ones it buys.
Al Gore, Dan Quayle, John Snow and Madeleine Albright are all on one hedgie payroll or another, their trading duties likely limited to trading on their good names. But, somehow, the real power brokers in New York and Washington don't seem especially impressed.
The SEC has just begun a major probe of suspected information leaks between big brokers and hedge funds. This is on top of the coming examinations of hedge funds that have voluntarily registered with the agency, after mandatory registration requirements were thrown out in court. Oh, and the feds also plan to shrink the pool of U.S. residents eligible to invest in hedge funds by approximately 85%. And they're working on a database designed to ferret out illegal hedge-fund trades in concert with exchange regulators.
Meanwhile, banking regulators are trying to make sure that their charges don't lend hedge funds too much money. The Massachusetts attorney general wants to crack down on the incentives brokers offer hedge funds to trade through them. Germany has made international regulation of hedge funds the cornerstone of its financial diplomacy. And, of course, Congress stands ready to subpoena anyone who manages to escape this dragnet with a few billion in pocket change.
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