Last week I wrote that a certain kind of Savage Capitalist was responsible for a good deal of market manipulation. Just how powerful that force was, leaked out at yesterday’s Senate hearings on the Bear Stearns bailout.
Pummeled by market rumors of insolvency, the investment house lost more than $10 billion —or more than 80 percent — of its available cash in a single day. Only a few days earlier, the chairman of the S.E.C., Christopher Cox, had sought to calm investors, telling reporters that “we have a good deal of comfort about the capital cushions” at Bear and other large investment houses.
Maybe Chris Cox should take his head out of the sand and investigate who gained from the fall of Bear Stearns? Who was spreading the rumours of insolvency because they were shorting the stock? Who created the self-fulfilling prophecy?
None of these questions will be answered by the current regulatory regime that shuns Hedge Fund Transparency. Whenever Democrats like Charlie Rangel have tried to go after the Hedge Funds either in taxing their profits or in creating more transparency, two of the Presidential candidates have stood with the embattled Billionaires. John McCain, who had Lord Rothschild host his London fundraiser and Hillary Clinton worked to block Rangel’s latest efforts.
Hedge fund and private equity managers are up in arms over the bill, not wanting to give up any of the perks of the business They’ve hired a coterie of lobbyists to fight the changes, with the Blackstone Group being one of the major sources of money for the efforts.
And they have some unlikely support. Both New York Senators, Democrats Charles Schumer and Hillary Clinton, who’s also running for President, have quietly indicated that they won’t support the bill, according to news reports.