In the wake of the Amaranth Advisors blow up, top U.S. policymakers are rethinking their lasseiz-faire attitude toward hedge funds, the Financial Times reports. Though the financial system absorbed the Amaranth blow without substantive interruption, some members of the President’s Working Group on Financial Services are questioning whether counterparty risk management will be enough to handle another major hedge fund blow-up. “The real concern is the transmission mechanism of the failure of a hedge fund into entities of a size that really are of systemic consequence for the [financial] system,” one official close to the group told the FT. “You don’t want the failure of a hedge fund to bring down a Morgan Stanley or a JPMorgan.” According to that official, the growth of hedge funds and the accompanying growth of available leverage and pension fund exposure has led to questions about the strength of the current system. Another official, with the Securities and Exchange Commission, told the newspaper, “There’s an opening to thinking about alternatives.” Hmmm.