Why not deregulate the banks instead?

Ian Morley from the Alternative Investment Management Association in “Hedge funds and regulators can work together” May 6, tells us that hedge funds are a positive force in markets by providing liquidity while at the same time on the opposite page Roger Merrit, from Fitch Ratings, in “Hedge fund behaviour in credit markets is untested” poses some serious questions about just that, and of course they are both right, for good and for bad.

Having said that when reading Morley’s spirited defence of voluntary regulations and of the fact that regulators should instead help to enforce these instead of coming up with their own I just want to ask where was he when the banking regulators decided for instance to force down the throat of the market, the opinions of a couple of few credit rating agencies. As one could argue that it is the excessive regulation of the banks that has been the main driving force for the hedge fund industry and that banks should in fact be more important than hedge-funds, perhaps what Morley should ask for is some deregulation of banks, but of course that is not what the alternative association is paying him to do.