Tim Giethner Is Worried About Hedge Funds and Systemic Risk

Mark Thoma writes:

Economist's View: Hedge Fund Worries: New York Fed president Tim Geithner is worried that market failures such as "lack of information, incentive conflicts and moral hazard" are causing risk levels in hedge fund markets to grow and, if the growth of risk continues, increased regulation of the markets may be required. He's cautious because, "With too much government intervention, innovation is constrained and the system is stifled." However, "With too little, the probability of systemic crisis may rise to

levels that are unacceptably high":

And he links to a story by David Wighton and Peter Thal Larsen in the Financial Times--which really is the finest newspaper in the world today: http://www.ft.com/cms/s/8d3e1c1e-4442-11db-8965-0000779e2340.html