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Rep. Frank Demands G8 Action vs. Hedge Funds' Destruction of the Economy

June 4, 2007 (EIRNS)—The following press release was issued today by the Lyndon LaRouche Political Action Committee.

In a polemical letter to President Bush just in advance of the G8 summit, Rep. Barney Frank (D-Mass.), Chairman of the House Financial Services Committee, posed the necessity of the United States and Europe collaborating to rein in unregulated hedge funds and private equity firms, or face the continued destruction of productive companies, the welfare of the workforce, and the financial system itself. Frank said that the letter is similar in scope to one signed by Member of the European Parliament Poul Rasmussen and others.

In his letter, Frank says:

"...In a few short years these institutions [hedge and private equity funds] have transformed capital markets in all of the G8 countries, as well as in many other OECD members.... Does the introduction of substantial amounts of additional leverage raise systemic risk concerns in our capital markets?...

"Private equity and hedge funds have, in a short period, become owners and movers of vast pools of financial capital, with significant influence on the real economy, employment and long-term competitiveness for our companies. Private equity transactions accounted for over a quarter of all mergers and acquisitions in the U.S. and the EU in 2005. Private equity buy-outs have expanded their reach to very large companies, industries and even companies linked to public services. Hedge fund transactions account for a third to a half of daily trading volumes on main stock exchanges...."