McCreevy Resists Calls For Hedge Fund Intervention

by Ulrika Lomas, for LawAndTax-News.com, Brussels

06 September 2007

European Internal Market Commissioner, Charlie McCreevy has remained dogged in his opposition to proposals for more hedge fund regulation, in the face of growing concern from EU lawmakers that hedge funds are responsible for much of the financial market turbulence sparked by the US sub-prime mortgage crisis.

McCreevy told members of the European Parliament that bad lending policies and a poor understanding of the risks posed by securities loans were the root cause of the recent crisis, not the activities of hedge funds.

“As much as some people want to demonise hedge funds, they are not the cause of the difficulties in the market," he stated.

“Financial markets function on risk. I do not criticise those who make fortunes when times are good. I’m not going to shed any tears now if there are losses."

McCreevy also pointed the finger at the credit ratings agencies, which he said were slow to downgrade ratings for structured finance backed by sub-prime mortgages.

McCreevy's office reportedly revealed last month that an inquiry will be launched into the sluggish response to the crisis by credit rating agencies.

The Commissioner's comments were made as French President Nicolas Sarkozy - a critic of hedge funds and speculators - commissioned a report calling for greater hedge fund transparency that could lead to a Franco-German push for such measures at EU level. Germany has been leading calls for a hedge fund code of conduct at G8 level, but has faced opposition from the US, the UK and Canada, who prefer a more laissez-faire approach to hedge fund oversight.

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