THE PLANK DECEMBER 8, 2008
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.