The Securities and Exchange Commission has cleared Morgan Stanley CEO John Mack in its investigation of possible insider trading at his former firm, Pequot Capital Management. So far, the SEC hasnt been so lucky in the clearing department, as it has come under attack at a Senate Judiciary Committee hearing, where the agency has been accused of trading Mack with kid gloves, a possible cover-up and poor handling of staff attorney Gary Aguirre, who claims he was fired for trying to blow the whistle on Mack. SEC Enforcement Director Linda Thomsen has defended the commissions actions, while witnesses said Aguirre was fired not because his probe of Mack, but because he had become difficult to deal with. Testimony revealed that there was no indication Mack had any information that could have been used for insider trading activity. But for some, the hearings may result in a broader look at the hedge fund industry and could -- perish the thought --result in changes in the amount of leverage allowed acquiring companies, such as private equity firms and hedge funds. Steven Rosenbush writes in Business Week that such a change could be catastrophic. If the government were to impose leverage limits, states Rosenbush, citing market watchers, the impact on the markets could be significant. He explains that limits on leverage would make deals less profitable, and that could lead to pension funds cutting back on their alternatives allocations. Deals could become less competitive, he continues, and deal volume and price could decline as a result, weakening the investment market overall.