October 15, 2006

Tighter Regulations Needed?

-- By Pushpa Sathish, Staff Writer

Just a little more than half of the private economists surveyed by the online edition of the Wall Street Journal felt that tighter regulation was needed for hedge funds to stop being a risk to financial markets. Of the 41 respondents of the survey conducted by WSJ.com, only 23 said that present regulations were not strong enough, while 16 felt that they were just right, and two said that they were too tough. Among those who said they were over-regulated was Dana Johnson of Comerica Bank, who felt that a heavy hand might push funds offshore. Forbes reports:

One of the top concerns of economists is hedge funds' borrowing and the degree of exposure lending institutions could have in a crisis. The lack of regulatory oversight on hedge funds means that little is known about their borrowing. Banks have been aggressive in extending credit, sometimes requiring little or no collateral on loans.

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