Even the best economists have trouble explaining the recent unravelling of global financial markets. Headlines suggest a lack of focus in Washington and on Wall Street. This has contributed to a crisis of confidence not only in our policy makers but also the system itself.
Rationality among professional traders has given way to fear verging on panic. The spill-over effects are impacting even firms whose balance sheets were considered sound. Because hedge funds operate for the most part outside the regulatory environment overseen by the Securities and Exchange Commission (SEC), the Department of the Treasury, and the Federal Reserve, many construe hedge funds to be above the law, serving the sole interests of fund managers and their wealthy clients.
