The hedge funds were just the regulators’ hobby.

Sir Gillian Tett “writes that the bank follies went unnoticed for so long partly because many regulators spent the last decade obsessed with hedge funds.” “Some effects of an unhealthy fixation on hedge funds”, May 7. Though close, she does not really get there.

What happened was that regulators invented some risk weights and then got themselves some risk surveyors, the credit rating agencies, and produced the line of “risk weighted assets” by which they thought their job regulating banks was all done... and so, to find something to occupy their now fulltime spare-time with they started to pick on the hedge funds.