re: #123 steve_davis

The beauty of this is that it’s burning down the people who deserve it. Hedge funds don’t exist just because they can. They exist because they’ve promised people with way more money than sense that they can generate percentage returns annually that can’t be gotten through normal channels, like with your typical broker, or through bonds. And lots of them are closed to the madding crowd, for instance, and lock up investor money for long periods of time, under the philosophy that the market is moody, and the hedge fund can’t successfully operate if people keep pulling their money out every time things look a little dicey. So there are a large number of very wealthy people who are fixing to get badly, badly burned here.

It would be fine if damage to a hedge fund affected only that fund and its witting investors; unfortunately, like the crisis in 2008, a large enough hedge fund can damage the real world, and indeed bring down the whole economic system.

There would have to be very draconian measures to protect the world from these predators — and we only have power to restrict activities of US companies and not those based off-shore. But maybe someone like Warren can figure out appropriate legislation that would at least protect US institutions, perhaps something that limits how much capital a US bank or any of its foreign subsidiaries can lend a hedge fund?