Debate Over Hedge Fund Regulation Reaches International Banks

May 21 (EIRNS)--In the last weeks there has been a furious debate among insiders concerning regulation of hedge funds. As the predatory nature of these funds becomes harder and harder to deny, and, the sheer volumes of cash used increase to ridiculous proportions, nations are trying to take steps to protect themselves. Realizing this, banks have begun to "circle the wagons" to stave of government "interference."

Two reports released over the weekend highlight these contrary approaches. A report from the European Organization for Economic Cooperation and Development highlights the enormous leverage that funds have in the market at large, and suggest that investors "stress test" their funds investment formula to a simulated 20% market collapse. Although not specifically calling for regulation, the highlighted danger is clear, since there is almost no fund that could stand up to such a hugh "correction" in the market. From the banker's side comes a report by the Financial Stability Forum of the BIS (Bank of International Settlements), which suggests that there has merely been "erosion in the counter party discipline" between funds and their sponsoring (creditor) banks, with the implication that the banks should be left to their own devises to solve any problems, a "non-solution" solution.