THE PLANK DECEMBER 8, 2008
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By the end of the month the global hedge fund sector will have lost $1 trillion in two years. But no one would actually argue for bailing out hedge funds instead of the auto industry, right?
Well, the Financial
Time’s John Gapper comes
awfully close. After admitting that, “Of course, there is no obvious reason
why any government should rescue a hedge fund,” he proceeds to press for, um, a government rescue for hedge funds:
But other institutions that had no
clear call on government funds have received them in this crisis. The hedge
fund industry, by some measures, dwarfs the Detroit car industry, which this week
returned to Congress to ask for $34bn.
The combined market capitalisation of
Ford and General Motors is $9bn, a small fraction of the equity given to hedge
funds to manage. Although Detroit employs many more people, directly and
indirectly, than hedge funds--and contributes more to the economy as a whole--Detroit's
investors stand to lose much less from its collapse than hedge fund investors.
In other words, rich people, by virtue of being rich--not,
say, by playing a critical role in the economy--should be the real objects of
our largesse. Gordon Gekko would agree heartily.
--Clay Risen
9 comments
Hedge funds should be banned outright, along with every scheme that would turn our capital markets into gambling casinos.
- nbarry
December 8, 2008 at 10:13am
Within seconds, WSJ's op/ed editor had that guy's agent on the phone.
- adaglas
December 8, 2008 at 10:33am
That's "Gekko" with two "k"s, not one.
- kevincollins
December 8, 2008 at 10:36am
you've got to be kidding me.
- poortomsacold
December 8, 2008 at 10:55am
Thanks, Kevincollins. I'll make the change.
- Clay Risen
December 8, 2008 at 10:58am
"In other words, rich people, by virtue of being rich--not, say, by playing a critical role in the economy--should be the real objects of our largesse."
This would appear to be a concise summation of the majority of what is wrong with the American economy pre and post collapse. Hopefully, this is a mistake we can elmiinate going forward.
- GSpinks
December 8, 2008 at 11:40am
Another case of how poor management should be rewarded for poor management. The same people screaming about the freedom to get rich and how the very taxes that are needed to help with a bailout they shouldn't have to pay, are now whining about not getting any help from the government. That's rich. Pun intended. [If they don't have the flour to make bread] Let them eat cake.
- jet
December 8, 2008 at 12:34pm
This post seems to be much ado about nothing, Gapper is right that rich hedge fund investors will lose an enormous amount of money, I see nothing wrong with acknowledging that, and see no reason to gloat in anyone elses misfortune. I also don't see any explicit calls for the hedge funds to be bailed out, and if anyone did they would be laughed out of congress.
- blackton
December 8, 2008 at 1:14pm
As Clay points out using the two paragraphs as example, the implication is clear and the words (for bailout) don't have to be spoken directly. I read the article before Clay posted on it, and a call for a bailout is exactly the impression I got. Clay points out that Gapper makes the case for the wrong reason. I was criticizing the bad attitude many of these folks have had lending a helping hand when they have so much. I don't think there's a problem making that criticism.
- jet
December 8, 2008 at 11:46pm