Monday, August 1, 2011

Soros Pushes Regulation in All Spheres via Political Spending; Cripples Competition; Evades Scrutiny

I've been thinking about Mr. Soros and his version of Corporatism.

Most folks in business for any length of time realize that larger enterprises love regulation.

They love it because it is a barrier to entry of smarter people.
They love it because it imposes disproportionate costs on smaller competitors.
They love it because they can write the legislation by way of lobbyists, bought-and-paid for politicians and revolving door bureaucrats who have been or will be on their payrolls.

In this case Mr. Soros made his money in the least regulated area of finance, took it for all it would give him (have you seen his recent returns? Not worth the 2 much less the 20)
agitates for rule changes, in Congress no less,* that shut the door to smaller (read less dangerous) players and continues with his game completely unfettered by the legislation he advocated for.

Here's a letter to the editor from this weekend's Wall Street Journal:
Good for Mr. Soros, What About Us? 
Regarding your editorial "Soros's Regulatory Hedge" (July 27): I wish my partners and I could give back a mere 4% of capital under management as George Soros is doing and be free of the new SEC requirement to register as an investment adviser. Instead, our small firm will be forced to create a compliance department and incur substantial costs to track and report various aspects of our business because the Dodd-Frank Act defines us as a systemic risk to financial markets.

We must make 44-page quarterly filings, and even longer annual filings require vast disclosure on personnel, partnership agreements and underlying investments—companies that have nothing in common except that we are a shareholder. Like most private equity firms, we use no leverage at the fund level. Our contract with investors limits us to a tightly defined list of permitted investments. Each of the companies we invest in produces audited financial statements. These audits are the basis for our own audits, which are provided to investors and used in fundraising activities already highly regulated by the SEC.

Contrast this to Mr. Soros's "family office," which will be free to invest billions of dollars in anything, anywhere, anytime with or without leverage and with little or no disclosure to anyone. The family-office exemption exists because Congress determined that requiring these private capital pools to register would not reduce systemic risk, though they may manage many times the capital our firm does. There is absolutely no credible reason to treat private firms managing third-party capital for sophisticated investors differently than family offices—except to create sound bites and score political points.
Brian P. Simmons


*Soros: You Have My Word as a Hedge Fund Manager "...says deep recession inevitable, depression possible"
I am always amused when Congress asks these guys to testify, it's like going to an Adolph Eichmann lecture on ethics, but I repeat myself*. Now in this case I agree but definitely not because he said it....

"You have my word as a hedge fund manager...."
[George Soros]

See also:
Frankendodd: "George Soros and the Feudal Future of Hedge Funds"