Here's a nifty summary, and Bainbridge's early critique.
I haven't evaluated the proposal closely, and won't be able to for awhile because I'm about to get out of range for a couple of weeks. But I do have a few quick thoughts on particular elements of interest.
First, we have to keep in mind that this isn't really a legislative package, but a kind of starting gun to let the intense lobbying begin. It will be interesting to compare the proposal to the sausage that emerges at the other end of the grinder.
Second, since we're about to embark on SOX II, wouldn't it be useful to look again at what happened with SOX I? Here's Butler and my analysis. At the end of our book we have some suggestions for regulatory humility, such as optional provisions and sunsetting. I fear that in the end we will find that we learned very little from the SOX debacle.
Third, the Obama proposal suggests (p. 13) requiring hedge fund registration under the Investment Advisers Act overseen by the SEC. It also proposes that hedge funds be required to make reports on funds under management sufficient to indicate whether they pose a threat to financial stability.
This is particularly misguided. The best commentator on that is Houman Shadab. See here and here. The bottom line is that hedge funds are more a solution to problems of the financial system than a cause.
The "systemic risk" argument is totally misguided. As Jon Macey has noted, hedge funds actually combat systemic risk by, essentially, betting against the "system." One way to make them part of the problem is to force enough disclosure that other financial institutions can follow them off any cliffs they seek to explore. See Macey, PROMISES KEPT, PROMISES BROKEN 265-72(2008).
And what's with this regulation by the SEC? Are we satisfied with the great job that agency did supervising Madoff? See here (detailing the SEC's massive regulatory incompetence in Madoff) and here (suggesting that the SEC was actually Madoff's unwitting accomplice).
Fourth, the proposal calls for (p. 40) "increased national uniformity through either a federal charter or effective action by the states." Butler and I show that this objective in insurance regulation is misguided and offer a better alternative.
Finally, let's keep in mind that the US is no longer alone in the world. Regulatory overkill here could be a boon for places like Singapore and Hong Kong.
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