This seems like good news:
A divided Securities and Exchange Commission approved new rules on Wednesday that would impose sweeping requirements on large hedge funds and other private investment advisers, a first for an industry that has long eluded Washington oversight.
Venture capital funds and some small hedge funds are excused from the rules, although these firms will still have to report some basic information to regulators.
The rules will require hedge funds, private equity shops and other advisers that mange more than $150 million to register with the Securities and Exchange Commission and turn over an array of crucial information. The funds will disclose details about the inner workings of their firms, the funds they oversee and their investors.
“Today’s rules will fee a key gap in the regulatory landscape,” Mary Schapiro, the agency’s chairwoman, said at a public meeting in Washington. “In particular, our proposal will give the commission, and the public, insight into hedge fund and other private fund managers who previously conducted their work under the radar and outside the vision of regulators.”
But for now, the new oversight regime is on hold. Regulators agreed to delay the start date of the rules until March 30, 2012, a nearly nine month reprieve.
Why was this never done before?
Maude
Wasn’t done because: Reagan, Bush Clinton, Bush.
trollhattan
This was a provision of Dodd-Frank, yes? Why was it not already in place, I wonder?
If somebody can ‘splain how John Paulson can make in a year more than many nations’ GDPs yet pay a lower tax rate than I, that would be nice.
PurpleGirl
Ask Chuck Schumer… he has lots of hedge fund manager friends.
BTW: I’m assuming you just did a copy and paste from the NYT. Bad on them for two typos in those paragraphs: mange and fee. I think they meant: manage and fill. Argh.
Han's Solo
My understanding is that it was not done before because the whole point of a hedge fund is that there are so few regulations. That is one of the big differences between a hedge fund and a mutual fund.
Another difference: not everyone can invest in a hedge fund. You need to have a net worth above a certain threshold, or income above a certain threshold, or have an in (be an employee) with the hedge fund.
cleek
not a dime’s worth of difference!
Maude
Purple Girl
I like mange and fee better. Kind of livens up the article.
Ochotona princeps
It wasn’t done before because ‘hedge funds’ typically aren’t open to the public. In order to invest in one you have to be an “accredited investor” with either $1M net worth or 200k in income for the last several years.
The idea is that investment regs are there to protect the average Joe. People are (theoretically) sophisticated, or can afford to lose lots of money, can invest in whatever cockamamie scheme they want to.
I actually somewhat disagree with the new rules. The SEC has enough to do without looking out for the interests of the rich–if your doctor or broker or whatever wants to lose all his money to the next Madoff, let him.
PurpleGirl
Maude: LOL.
Mothra
Not a dime’s worth, billions of dollars worth. There are billions of dollars worth of difference between the two parties. That kind of rhetoric is just another form of voter suppression, and it’s on the cheap.
John, do you listen to Glenn Beck at all? He is ranting routinely about the way that Obama uses regulatory agencies, an he claims that they are unconstitutional. It’s another tactic that they use to keep me “free” by poisoning me and creating conditions where I will have to work until the day that I lay down on the job and die.
Nobody better tell me that there isn’t a dime’s worth of difference. I just can’t take that bullshit anymore.
Timothy Trollenschlongen (formerly Tim, Interrupted)
John, you asked:
I ask: Why has it still not been done?
Why do so many Obama administration actions, seemingly positive, come with delays, reprieves, qualifiers, exemptions, etc. that minimize and postpone their seeming effectiveness? The ridiculous “certification” step in repealing DADT, for instance.
For the reflexive Obot screechers, don’t bother. I’m asking a real question here. I’d like a coherent answer. Thanks.
Mike Goetz
Hedge funds haven’t been as heavily regulated because typically they have a small number (to qualify as a hedge fund, you can’t have more than 20 or so participants) of very rich investors, who were thought to be able to fend for themselves. This really should have been done after LTCM went tits up, when it was discovered that hedge funds can blow up the entire economy.
The extra regulation is good, reforming how they are taxed would be even better.
Mike Goetz
Mothra,
I do believe cleek was serving up some snark, extra dry.
Mothra
Thank you for the heads up, Mike. I’m sorry, cleek.
I’m on edge today, for personal reasons, the news just doesn’t make me feel any better. We cannot keep having these financial disasters. Our peril is being misrepresented to the public. I feel at wit’s end.
Pliny
@2 trollhattan
Another sweet provision of Dodd-Frank was for the CFTC to reinstate position limits for commodity speculation (which they had quietly removed for sixteen firms, allowing them to flood the commodities market with free money from the Fed). They were ordered to do this by January, and still haven’t. Bernie Sanders is pretty pissed about this
Martin
I don’t think it was needed before, to be honest. Hedge funds were unregulated funds open to only the super-rich who could afford to lose everything. 10 years ago, there simply wasn’t enough money tied up in those individuals, and therefore in the hedge funds to wreak financial armageddon on the nation – $320B in assets in 2000. That’s small change to the nations economy, but by 2008 that was up to just about $2T, and that’s no longer the depositors getting fucked but everyone else if it collapses.
Now, why it wasn’t done after Sept 2008 is a perfectly valid question. My feeling about why this stuff has been so slow in coming is because it could. There has been a LOT of scrutiny paid inside and out of Wall Street over the last 2 years and while that’s going on, you have sort of an unofficial regulation taking place. As attention shifts away, that’s when the formal regulation is needed, and a bit of time helps everyone determine what kind of regulation is really needed (as we’re still learning new things about what’s going on). In the immediate aftermath of 9/08, I think we would have gotten the regulation quite a bit wrong, regulating the most visible culprits, not the most powerful. Plus I imagine this decision was quite difficult to win.
giltay
Mothra: I agree with Mike Goetz that I think cleek was being sarcastic, but yours was a quality comment.
LGRooney
How long before the hedge funds re-title themselves as something else, claim the regulations no longer apply to them, and the courts agree that the law never stated that “alternative risk-management pools” were not explicitly stated in the regulations therefore they are free to do whatever they want?
Linda Featheringill
Mothra #11.
I’m having a rough day, too. Doing the best that I can but it’s just not good enough. Hate days like that.
$%^))(*)*&$$$!
[Hang in there. :-)]
Edited for clarity [See? I can’t even do this with style and grace.]
Linkmeister
Brooksley Born tried to get derivatives regulated, but she was overruled/outvoted. Since those are used by the hedgers, that would have helped.
Pliny
@15 LGRooney:
Why would they need to do that? It’s much easier to just give Chuck Schumer a pile of money and have him push an amendment or two. See: Carried Interest (in which hedge fund managers and other various hyper-rich pay only 15% capital gains on all the money they make)
Mothra
Thank you, Giltay and Linda,
The flaws in unregulated capitalism are becoming as clear as the flaws in communism. Yes, Rooney, they will reinvent themselves. We have a chance only as long as we keep regulating them, investigating them, and sending the worst offenders to jail.
kindness
This will make the Gaultians cry.
Bobo will certainly piss and moan a column out of it.
catclub
I liked “mange more than $150 million”
reminds me of scrofula.
catclub
Martin @ 13: wasn’t LTCM in 1998 big enough to do very bad things if it collapsed – hence it was not allowed to collapse?
Wasn’t LTCM an unregulated hedge fund?
JPL
When’s the birthday party begin for John. I suggest we post youtube videos singing happy birthday..
burnspbesq
@ (There are those who call me) Tim:
In this case, because it takes time, for both the SEC and the newly regulated firms, to build a reporting and disclosure apparatus that has never existed before. Anyone who has lived through the process of taking a company public gets this. The data have never been collected in this way before, and may never have been collected at all. Documents have to be drafted from scratch, and lawyers will go back and forth for weeks over seemingly trivial word choices. Etc., etc. Not a completely fair comparison, but could you write a 100 page paper on a subject that you know nothing about by this time next Monday?
burnspbesq
@ catclub:
is that the skin condition, or the third-person-singular form of the French verb? Either would be somewhat appropriate, but clarity is always helpful.
gogol's wife
Why do some people seem to have reply buttons and I don’t? Are they using that incredibly complicated process that somebody explained?
burnspbesq
Can I just say that the second link up from the bottom of this page on the SEC website really pisses me off? Fucking Republicans.
http://www.sec.gov/spotlight/dodd-frank.shtml
Basilisc
Actually the SEC tried to, back in 2004, but it got overturned in court two years later and the agency gave up. See this article, about halfway down (under “US regulation”).
This is part of a broader pattern, of course – pre-crisis, regulators had all sorts of ideas for putting fairly mild controls on risk-taking, requiring fairly mild forms of disclosure, etc, but inevitably “the industry” cracked the whip, Congressmen jumped, political appointees cowered, and nothing got done. And when it all blew up people blamed the regulators.
kindness
gogol’s [email protected]
None of us have the Reply button any more. What we do is hit the link on the comment, copy the web address, in the posting box at the bottom hit the link button, copy web address into link address & then enter who it was we were replying to.
We’re replying longhand. Might as well be programming in cobol.
Roger Moore
@Ochotona princeps:
They’re also there to prevent systemic risks to the financial system. Since hedge funds have proven themselves capable of creating systemic risk, it makes sense to regulate them.
Ochotona princeps
Did they? My understanding was that the worst of the damage was caused by investment banks’ proprietary trading–i.e., the stuff Bear Stearns, Lehman Brothers et al. were doing on their own. Plus some help from AIG and associated bit players.
Keep in mind that hedge funds don’t create financial products (like mortgage-backed securities) like the banksters do, they just trade. There’s no substantive difference between a $500M hedge fund and a guy with $500M day trading from his basement.