We were getting a bit worried that the apparent silence coming from US officials in the face of calls by various Europeans for international hedge fund regulation was a sign of acquiescence to the terrible idea. Fortunately, Henry Paulson swatted down the talk of hedge funds and private equity as "locusts" in need of international regulations and policing.
U.S. Treasury Secretary Henry Paulson made clear on Saturday that he thinks any risks posed by lightly regulated hedge funds can be handled through market discipline without adding heavy government regulators.
"Market discipline, focusing on the risk management of regulated counterparties, is the most effective way to address potential systemic risk concerns," Paulson told a news conference at the close of a two-day Group of Seven finance minister's meeting in the German industrial city of Essen.
He said a thriving global hedge fund industry "is in the U.S. interest" and adds liquidity to financial markets.
Paulson tells G7 let markets regulate hedge funds [Reuters via Washington Post]