The SEC declined to comment

Posted by Marc Hodak on April 17, 2011 under Unintended consequences | Be the First to Comment

And why should they?  They didn’t write Dodd-Frank.  But they did lobby relentlessly for greater regulation of, and therefore greater control over, hedge funds.  Which led to this:

Jamie Nash, a hedge-fund lawyer in New York, said some start-up managers are nervous that they won’t be able to build an operations or compliance system that meets the SEC’s expectations.

The regulations “are erecting barriers to entry,” Mr. Nash said. “That is going to cause consolidation in the industry of smaller managers into larger managers who have the infrastructure and can afford this.”

A spokesman for the SEC declined to comment.

So, the government decided it had to increase regulations the one part of the financial services sector–hedge funds–that had nothing to do with the financial crisis.  And because the government felt compelled to spend gobs of taxpayer cash to bail out financial institution that were too big to fail, Congress created a raft of regulations whose main effect will be to crush entrepreneurship and compel waves of consolidation.

And the people who pushed for this regulation, who inadvertently insisted that the fixed costs of doing business in America are not yet high enough, will be shocked to find that only the big survive.  They likely will blame the big companies for the lack of real competition, or they will blame capitalism.  They may even blame the economics profession or discipline itself.