The latest bullshit populist bill to come out of the brain trust that is the U.S. Senate, per the WSJ, is aimed at those dastardly Private Equity and Hedge Fund robber-barons, o noesssss!
That this issue is once again on the table is hardly surprising in and of itself, but - and I didn't think this possible - somehow, the proposal is actually more ridiculous than it was the first time we heard about it, ya' know, back in the good ol' days when Steve Schwarzman was still ballin' out, and Trader Monthly was actually still in business.
Anyhoo, the gist of the Hedge Fund Transparency Bill, introduced last week by Chuck Grassley (R - Iowa) and Carl Levin (D - Michigan), essentially comes down to forcing Hedge Funds, Private Equity, Venture Capital, and similar funds with > $50mm AUM to disclose to the SEC, at minimum:
- The names of the companies and natural individuals who are the beneficial owners of the hedge fund and an explanation of the ownership structure.
- the names of any financial institutions with which the hedge fund is affiliated.
- the minimum investment commitment required from an investor.
- the total number of investors in the fund; the name of the fund's primary accountant and broker.
- and the current value of the fund's assets and assets under management.
The rationale here is that hedge funds have gotten so big, and so entangled that they pose a serious systemic threat to the U.S. and Global financial system. One would be hard pressed to refute this basic allegation, although methinks its hardly enough to rationalize raining down with righteous regulatory indignation on the bulk of the alternative asset management industry. Unsurprisingly, we see our old friend, the classic Bloomberg-esque "Hedge funds for dummies" introduction, below which they cite several other factors (non sequiturs, mostly) supporting their call, among them:
- Endowments and Pensions, the same ones that poor Joe & Jane 6-pack depend upon for their economic well being, have increasingly invested in HF's, leaving these poor innocent folks dangerously exposed to losses.. No mention of the fact that this concern could be tempered by oh, I don't know, actual oversight of the Pensions/Endowments by their boards, managers, and existing regulators, of course.
- A rambling description of how, as far as I can tell, the failure of Bear Stearns HGSCELF lead to Merrill being sold to BoA and every other bank on The Street being forced to take TARP money.
- The claim that, as SEC Commissioner Luis Aguillar stated in a speech on January 9, 2009, the SEC "currently lacks tools in the hedge fund arena to provide effective oversight and supervision," somehow, someway, this Bill will render the SEC effective, despite effectively zero evidence to support that conclusion.
- Somehow, an operation with $50mm AUM is deemed to be included in the single entity "Hedge Funds," and thus necessarily part of the axis of financial evil. This makes sense, clearly.
The best part of this whole clusterfuck might be that necessarily, these guys must be delusional/dense/retarded to think that the Securities & Exchange Commission, which failed so epically over the course of the past several yours, is up to the lofty task of doubling (or worse) their responsibilities and workload. Clearly, the same group that totally missed the boat on Madoff, despite being spoon-fed 10 years worth of virtually every detail of the scam is up to the task.
For sure, all criticism should end here, QED, but just for shits & giggles, we move on...
Given the requirements spelled out in the numerical list above, the only thing this Bill actually achieves is to guarantee employment of the lawyers, bankers, and accountants whose job it is to devise ways to obfuscate relationships between owners, clients, affiliates, and investors. Someone should remind these two asshats to be careful what they wish for, since given the populist leanings of those in power, they very well might just get exactly what they're wishing for.