Art G
Thinks s/he gets paid by the post
- Joined
- Nov 5, 2007
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Giant hedge funds and their greed and lack of government regulations against such are destroying the market. What should be done to eliminate them? Discuss.....
Care to elaborate on how they are "destroying the market," and why that means they should be "eliminated?"Giant hedge funds and their greed and lack of government regulations against such are destroying the market. What should be done to eliminate them? Discuss.....
Giant hedge funds and their greed and lack of government regulations against such are destroying the market. What should be done to eliminate them? Discuss.....
Brewer is too smart to get involved in this thread.........
dunno about smart, but i do have artg on ignore.
What's the old saying Art, buyer beware.
The Federal Reserve, looking to spur investment in lenders hit by credit-market losses, is weighing three measures to ease rules for private-equity funds that buy bank stakes, people with knowledge of the deliberations said.
One proposal would permit buyout firms to use ``silo'' funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be named because the talks aren't public. Under another scenario, the Fed would let private equity firms exercise more control of banks they invest in. A third plan would encourage firms to team up on bank deals.
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The Fed subjects private equity firms to more oversight when they exceed a 9.9 percent voting stake in a bank. If they buy more, they may be deemed to have a ``controlling influence'' and be classified as a bank holding company, which triggers restrictions on non-banking activities and the amount of debt they can take on. To avoid that classification, investors may agree to be passive, which can mean limits on board representation.
The Fed is considering liberalizing the control guidelines, the people with knowledge of the deliberations said. That may allow buyout funds to amass up to 24.9 percent of a bank while also taking a more active role and getting board seats.
Buyout funds typically rely on debt funding to make acquisitions and invest in multiple companies, often in a variety of industries. The firms typically hold numerous stakes in a single fund.
Clubs, Orphans
Under the proposed silo structure, the buyout firm would ``orphan'' the bank investment by limiting its ties to other investments or funds, the people said. This could be done by eliminating any lending or cross-investment among the funds and preventing asset transfers between them, they said.
Another proposed plan would make it easier for a group of private equity firms to invest together in a so-called club deal without triggering bank-holding rules. The firms would collectively buy stakes in a bank and the Fed would agree to treat each firm's investment independently instead of aggregating their holdings to calculate control.
Of course, when taking a stock price down, it's not unlikely that others who own the stock have also already dumped their position, thus causing in effect the destruction of an industry.
Hedge funds and the dropping of the uptick rule only served to assist those looking to short stocks. I've yet to find any logical advantage to removing the uptick.
How does causing a decline in a industry's stock prices "destroy" it?
Other than affecting its ability to raise new capital by selling stock, a company's stock price has very little effect on its business. If business is good and the stock is too cheap, its a pretty good bet that someone will buy the stock and push the price up, putting the hedge fund in a world of hurt.
It might even be another hedge fund that does it.
Well besides the fact that it's a complete manipulation of the market and causes the average investor to lose confidence in not only the stock market, but the economy as well; taking a stock down to a reasonable price is one thing, but destroying them is another. Let's use FNM as a good example.....do you not think naked shorting of this stock to....oh say....$2 might cause a concern?
These massive hedge funds are making certain people incredibly wealthy at the expense of many, many others.
Assume you own a restaurant and I patronize it every day, but I never pay my check....
Well besides the fact that it's a complete manipulation of the market and causes the average investor to lose confidence in not only the stock market, but the economy as well; taking a stock down to a reasonable price is one thing, but destroying them is another. Let's use FNM as a good example.....do you not think naked shorting of this stock to....oh say....$2 might cause a concern?
These massive hedge funds are making certain people incredibly wealthy at the expense of many, many others.
Assume you own a restaurant and I patronize it every day, but I never pay my check....
As soon as another hedge fund or investment house determined this was happening they would be free to implement a counter-strategy.Hamlet, I believe you're confusing the issue of shorting a stock vs. naked shorting a stock. The problem isn't with the shorting, it's with the lack or rules for hedge funds. Let's look at the other side, assume for a second they could buy a stock without ever having to pay for it. Don't you think the share price would rise? Would this distress you at all?