The United States Federal Reserve, which is charged with overseeing the financial system, is not convinced that there’s any hedge fund that could endanger the entirety of U.S. capitalism, and therefore it’s not convinced that the funds need Fed oversight.
Reuters reports on the Fed’s assessment, citing a person familiar with the Fed’s position. The news comes as the Financial Stability Oversight Council, the All-Star team of financial regulators put together under the Dodd-Frank Act, begins poking around the world of finance for companies that A) could bring us all to the brink of economic Armageddon; and B) are not banks (because, obviously, banks are already known to bring us to the brink on a regular basis). Says Reuters:
The indication that hedge funds might escape this designation is sure to send a huge sigh of relief through the $1.7 trillion industry, which has long avoided the tighter controls imposed on mutual funds, for example.
The source said the Fed does not think any one hedge fund can be “systemically important” but believes that information about the funds’ positions could give the council insight into potential risks. The source requested anonymity while discussing talks held with the Fed.
Meanwhile, mutual funds and insurance companies are trying to persuade the government that they, too, are not systemically important and therefore do not merit additional oversight. It’ll be interesting to see how successful the insurance industry is at persuading the government to look the other way.
mtaylor [at] observer.com | @mbrookstaylor