Shocker: Dodd-Frank Financial Regulation Backfiring
“It’s unintended consequences gone wild.” I wouldn’t go that far…yet. The unintended consequences are just now trickling out as the Dodd-Frank law’s rubber hits the road. Keep in mind that they are still writing hundreds of rules embedded in the law. When that process is complete I have no doubts the quote above will be apt. For now, it’s just a few gigantic hedge funds taking to the dark corners despite the law’s intention to bring them into the light.
On Tuesday we learned that George Soros was returning all of the capital of outside investors to his fund…By closing their funds to outside investors, these managers will be able to escape attempts to regulate them. They won’t be classified as hedge funds anymore. Despite their billions of dollars under management, they’ll simply be private investors or family funds.
Today we learn that Steve Cohen, the founder of SAC Capital, is closing his flagship fund to outside investors. He hasn’t yet decided to refund their capital. For now he’s just not allowing them to contribute more. But people familiar with the company believe that this could be the first move to eliminating outside investors altogether.
That would be a backfire. More to come.Tags: barney frank, chris dodd, regulation