Aug. 29, 2007 (LPAC) -- In an op-ed for today's issue of Sueddeutsche Zeitung, the chief economist of Germany's national labor federation of Germany, makes the case for regulating hedge funds.

The "curse of the Carribbean" finally hit Deutsche Bank, notes economist Dierk Hirschel, when Bear Stearns shut down two of its hedge funds. Other German banks, from IKB to West LB and Postbank, to Sachsen LB got hit by the U.S. mortgage crisis, with considerable losses suffered since.

This makes the case once again for regulation, Hirschel writes, proposing five steps to achieve it:

(1) Without the banks, hedge funds are nothing, therefore the banks must control the funds;
(2) increased risk provisions for hedge funds;
(3) ending tax-exempt status for funds, imposing taxes;
(4) derivatives trading shall be permitted only at regulated stock exchanges;
(5) introducing state control of rating agencies.

Unfortunately, Hirschel does not elaborate on his concluding argument, namely that the finance sector must return to its classical economic mandate of financing industry. Also, his proposals needs to recognize the need for a top-down regulation, through a New Bretton Woods agreement to replace the presently failed world monetary system.