Baker Cooking Up A New Old Hedge Fund Bill

Apparently not taking to heart the words of Federal Reserve Chairman Ben Bernanke, who said last week the hedge fund industry is its own best regulator, Rep. Richard Baker (R-La.) is dusting off a 7-year-old bill that would place HFs under the supervision of the Federal Reserve.

Apparently not taking to heart the words of Federal Reserve Chairman Ben Bernanke, who said last week the hedge fund industry is its own best regulator, Rep. Richard Baker (R-La.) is dusting off a 7-year-old bill that would place HFs under the supervision of the Federal Reserve. The Hill reports that the former head of the House Financial Services subcommittee on capital markets is revisiting his 1999 proposal with the help of Rep. Barney Frank (D-Mass.), who last month, after the Securities and Exchange Commission’s hedge fund rule was struck down, proposed a bill to give the SEC power to supervise the industry. Seven years ago, according to The Hill, Baker pitched a bill that would require HFs to make asset/liability/leverage reports quarterly to the Fed. The industry responded by claiming such reports would endanger the funds’ privacy. So this time around, Baker told The Hill, he is looking “not for the public to have this knowledge, only to empower regulators to position resources sufficiently.” He said he’s not looking for a law that would “automatically trigger guys in black suits with briefcases at the front door.”

Who ends up minding the hedgies could make a difference, and there are several contenders: There’s the SEC, with a mandate to protest investors; and the Fed, which is more concerned with “systemic risk” to financial markets. Also possible regulators are the Commodity Futures Trading Commission, which already tracks some big hedge funds, and the Treasury Department, which is planning a series of hearings to get a better feel for impact of hedge funds on the economy.