Today hedge fund titans Philip Falcone, Kenneth Griffin, John Paulson, James Simons and George Soros will speak before the House Committee on Oversight and Government Reform. Tim Lind, Managing Director at post-trade, pre-settlement services provider Omgeo was recently given the chance to defend the industry in a panel discussion at SIBOS in Vienna entitled "Hedge Funds are the root of all evil". "To me the root of all evil is illiquidity," Lind told Opalesque.

"Hedge funds as a group are liquidity providers, and in times of short liquidity you do not want to be cutting off that supply." Craig Asche, Executive Director for the Chartered Alternative Investment Analyst (CAIA) Association told Opalesque recently. "They are able to step in and make loans in environments that are very difficult, and the hedge funds are willing to take that risk when other institutions clearly are not. I would hate to see that curtailed through regulation."

Expectations for increased regulation

In a recent WSJ article MFA head Richard Baker expressed his expectations for the easy target of the hedge fund industry to suffer from an increase in regulation. "Whenever you get into times of crisis - like this - then the risk is that politics mixes with regulatory decisions and it is not usually a very good or productive result." Asche pointed out. "The obvious risk is that regulators feel they don't have time to hear all of the opinions out there before making a decision. They feel they have to act very quickly."

Regulation by self control

Lind is hopeful that the industry may be saved from over regulation by the argument that regulation which is too prescriptive can become simply a blue print to circumvent the law. "I feel we are going to see hedge funds demonstrate to regulators that they have control over their environment. If they prove they have the capabilities to manage this risk, then they may be able to preempt any more prescriptive regulation."