Hedge funds (hedge fund news) seem to be surviving the financial reform movement in decent shape--which may be a really good thing. A recent commentary in the Washington Post notes that financial risk isn't going away. The issue is "how to entrust it to responsible players. The crash of 2008 demonstrates that risk was shouldered by the wrong people."

Consumers over-leveraged and got burned. Big banks over-leveraged and over-concentrated their activities in mortgages and also got burned. "Lawmakers should be asking themselves what type of financial vehicle survived the stress test of the recent crisis. Then they should encourage that type of firm. What firms am I talking about? Hedge funds. In 2007, when the mortgage market imploded, hedge funds were almost unique in avoiding disastrous losses; as a group that year, they were up 10 percent."

This is an interesting view. Clearly, a lot of domestic funds were savvy enough to stay away from the most toxic CDOs (CDO news), forcing banks to peddle them hard in Europe. There are some systemic issues that need to be addressed, however. Another LTCM could easily happen again. For the most part the world is better off with these funds. But perhaps they ought to be separate from nationally chartered banks. 

For more:
- here's the article 

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