The most clamorous reasons cited by the votaries of regulating the Hedge Fund market is the amazing development of hedge funds and the elevated influence and energy that hedge funds are possessing on the economic markets. This section sets forth some principles of sound regulatory and procedural design and style. In addition, a unified regulator would eradicate discrepancies in the regulatory approaches that can frustrate great-faith attempts by firms to comply with the law.
The economic crisis of 2007-2009 occurred despite—and maybe partly because of—heavy regulation.20 Government regulations can be gamed and sometimes generate incentives for companies to take actions that make them less resilient. Prior to Dodd-Frank, the current state regulatory method subjected insurers to several state regulators.
The financial system is central to the functioning of the rest of the economy, so policymakers’ concern for financial stability is not surprising. In practice, nevertheless, the bifurcated duty has resulted in tense regulatory battles and duplicative effort by regulators and market participants.
Furthermore, agencies developed to be independent of outside influence are not the most powerful regulators.92 The CFPB, OCC, and FHFA will better incorporate a broad range of policy views if they are governed by multimember boards with mandatory political balance.
Parties affected by this legislation are attempting to decide the best way to begin Dodd-Frank implementation initially and Dodd-Frank compliance after the legislation has been implemented. They are not topic to the regulatory impact-evaluation requirement applicable to executive branch agencies97 and, with only a couple of exceptions, their organic statutes do not require financial analysis.…