Five of the world’s richest and most successful hedge fund managers visited Capital Hill on Thursday to brief U.S. lawmakers on the role hedge funds may have played in the current financial crisis.
John Paulson, Philip Falcone, James Simons, Kenneth Griffin and George Soros were called to testify at the U.S. House of Representatives Committee on Oversight and Government. The hearing examined systemic risks to the financial markets posed by hedge funds and proposals for regulatory and tax reforms. Committee Chairman Rep. Henry Waxman (D-Calif.) reportedly asked these five to testify because each had earned on average more than $1 billion last year.
Hedge funds have been accused of contributing to the current financial mess. And while these leaders support greater transparency for the hedge fund industry, they placed the blame for the crisis squarely on the shoulders of other institutions, such as mortgage originators, investment banks, rating agencies, and sellers of credit default swaps (CDS).
John Paulson, in particular, likened the hedge fund industry to an exporter or manufacturer, able to draw foreign capital to the U.S. and create jobs. In his testimony to the Committee he commented:
“The hedge fund market has grown rapidly over the past five years, from approximately $800 million to $2 trillion in assets under management. The US has remained a leader in this area, accounting for approximately 70% of the market, although we have lost share in recent years to London, Asia, and Switzerland – many of which offer various financial incentives to attract the hedge fund industry.
As Americans, we are proud of the leadership position the United States occupies in this
industry, the jobs our industry has created, the export earnings we have produced for our country and the taxes we generate for the Treasury. For example, over the last five years, our firm has increased our employee count by 10X, creating numerous high-paying jobs for Americans. In addition, eighty percent of our assets under management come from foreign investors. The revenues we receive from foreign investors allow us to contribute to the U.S. economy like an exporter of goods, bringing in money from abroad,” Paulson said.