Bernanke: Pro-Hedgies

I don't hate the ol' Bernanker anymore. This may be the first clear, concise and smart thing he's said since he took over Alan's job. Thanks - finally policymakers are realizing that it's ultimately the [qualified] investors' job to decide if the prospective returns are worth the risk.

clipped from online.wsj.com Bernanke Says Don't Regulate Hedge Funds Too Heavil "Because hedge funds deal with highly sophisticated counterparties and investors, and because they have no claims on the federal safety net, the light regulatory touch seems largely justified," Mr. Bernanke said in prepared remarks of a speech at New York University. He called the "rapid growth" of hedge funds "one of the most important developments in U.S. financial markets in the past decade or so In the case of hedge funds, as long as investors are sophisticated and understand the potential for losses, then "market discipline is a powerful and proven tool for constraining excessive risk-taking," he added. In response to the LTCM episode, the Congress might have imposed a much more intrusive regulatory regime doing so would have been costly and technically difficult, would have increased moral hazard...and likely would have reduced the social benefits of hedge funds by hampering the ability of their managers to respond quickly