When all was said and done, a report by Federal Reserve Bank of New York staffers says there is nothing better at the moment than counterparty credit risk management practices to protect against system failures caused by hedge funds. Titled Hedge Funds, Financial Intermediation, and Systemic Risk, the report prepared by John Kambhu, Til Schuermann and Kevin Stiroh makes no specific policy proposals, but rather examines the hedge fund industry, its benefits to U.S. capital markets and how it may cause market failures. According to the report, “Effective CCRM Is obviously needed for any counterparty, but hedge funds differ in important ways” and as a result “make CCRM for exposures to hedge funds intrinsically more difficult to manage, both for the individual firm and for policymakers concerned with systemic risk.” Among the concerns about the erosion of CCRM effective, the report, citing Fed Chairman Ben Bernanke, notes that competition for HF business results in “lower than appropriate fees and spreads, or inadequate risk controls such as lower initial margin levels, collateralization practices, or exposure limits.” The report entertains three alternatives to CCRM – outright HF regulation, mandatory provision of more information to regulators and the investment community, and adoption of “best practice” techniques – without advocating any of them. “While various market failures may make CCRM imperfect,” the authors conclude, “it remains the best line of defense against systemic risk.