German Chancellor Angela Merkel, who hosted yesterday\’s summit of German, French, Italian, Spanish, Dutch and British leaders in Berlin, said the sort of rampant speculation and misuse of leverage that occurred in the credit bubble would not be tolerated.
"We have today underscored our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk," she said.
But hedge funds have been severely tested in recent months: and shown that they do not in fact pose systemic risk.
The systemic risk in fact came from the banks….those parts of the financial system that you already regulate.
We all understand that you just don\’t like these "unregulated" investors, because they don\’t compliantly do what you tell them to, but that\’s no justification for loading them with regulatory controls.