The Lavoisier Report

Came out yesterday. What went wrong and how to stop it happening again.

There\’s a few nice digs at various bits and pieces. Fannie and Freddie certainly get some blame, as does the way in which certain countries had fixed exchange rates vis a vis the dollar.

But the bit I like best is this. There\’s a lot of talk going around that hedge funds must be regulated, that the locusts must be stopped. What the actual report (as opposed to idiot politicians feeding off it) says is: 

86) Concerning hedge funds, the Group considers they did not play a major role in the emergence of the crisis. Their role has largely been limited to a transmission function, notably through massive selling of shares and short-selling transactions. We should also recognise that in the EU, unlike the US, the great bulk of hedge fund managers are registered and subject to information requirements. This is the case in particular in the UK, where all hedge funds managers are subject to registration and regulation, as all fund managers are, and where the largest 30 are subject to direct information requirements often obtained on a global basis as well as to indirect monitoring via the banks and prime brokers.

87) It would be desirable that all other Member States as well as the US adopt a comparable set of measures. Indeed, hedge funds can add to the leverage of the system and, given the scale at which they can operate, should a problem arise, the concentrated unwinding of their positions could cause major dislocation.

Hedge funds should be regulated in the way that the UK currently regulates hedge funds. That is, not a lot, but tell the regulators what you\’re doing.

We have a political system where the politicians puit into practise what the technocrats tell them is needed. That\’s the idea, at least.

Hands up anyone who is stupid enough to believe that the politicians will indeed follow this specific recommendation?

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