Hedge Fund Managers Favor More Transparency

Five of the nation's most successful hedge fund managers urged a congressional committee Thursday not to impose too many new regulations on their industry. Several fund managers did say they support efforts to force the industry to become more transparent about its holdings. Hedge funds have been criticized for accelerating the worst financial crisis since the Depression.

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ARI SHAPIRO, host:

Hedge funds are also taking a big hit in this financial crisis. Investors are yanking their cash out of these private investment funds. And lawmakers want to tighten the regulations on hedge funds. Top players in the industry were on Capitol Hill yesterday trying to fend that off. NPR's Jim Zarroli reports.

JIM ZARROLI: The $1.7 trillion hedge fund industry has been criticized for the role it's played in making the markets more volatile. Fund manager George Soros acknowledged that hedge funds were an integral part of the housing bubble that built up in recent years.

Mr. GEORGE SOROS (Global Financier, Philanthropist): But the bubble has now burst and hedge funds will be disseminated. I would guess the amount of money they manage will shrink between 50 and 75 percent.

ZARROLI: Soros said now is not the time to crack down on hedge funds too much, and he urged Congress not to overreact by imposing ill-considered and punitive regulations on them. Several fund managers said they supported efforts to force the industry to become more transparent about its holdings. They said information about their assets could be released to regulators, but they said such information should be withheld from the public because their asset strategies would no longer be secret.

Democratic Congressman Elijah Cummings said the way hedge fund managers get paid is unfair. Much of the money they make is considered capital gains which is taxed at a much lower rate than income. He said that means these five fund managers who make on average more than a billion dollars a year pay a less of their income in taxes than Joe the Plumber. Jim Zarroli, NPR News, New York.

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