Times Takes Treasury Secretary To Task

Is newly minted Treasury Secretary Henry Paulson Jr. going soft on hedge funds?

Is newly minted Treasury Secretary Henry Paulson Jr. going soft on hedge funds? The New York Times seems to think so. In an editorial today, the newspaper contrasts Paulson’s hedge fund comments a month ago when he stressed the importance of transparency and liquidity in the industry, to remarks he made last week in which he “devoted less than one-tenth of his speech to hedge funds”-- talk about measuring one’s words! – and “leaving the impression that he is basically satisfied with the regulatory status quo.” The Times goes on to recall hedge fund-related comments by other top officials from the Federal Reserve Bank of New York and the Securities and Exchange Commission that the paper says “have gone further than merely acknowledging ‘potential risks’ and pledging more ‘deliberations.’” While The Times notes that banks “indirectly” supervise hedge funds, it fears that the lure of greater commissions and profits as a result of their relationship with hedge funds will cause some bankers “to err on the side of recklessness.” The Times, seemingly to agree with Paulson’s call for balanced regulation, concludes that “the challenge of striking a balance is beginning to sound like an excuse for delay,” warning that “it’s time to move the discussion beyond whether hedge funds require more regulation to how they should be regulated.”