Yesterday’s NYT Book Review looked at a half-dozen books about Wall Street and the financial crisis. I certainly didn’t expect to read this in the review of Sebastian Mallaby’s More Money Than God:
[Mallaby] is right to point out that stand-alone hedge funds didn’t cause the most recent financial meltdown. More important, even though the most successful hedge fund managers make Wall Street C.E.O.’s look like impoverished salarymen, their funds are generally “small enough to fail.” The year 2008 was a time of carnage in the hedge fund world, but taxpayers didn’t have to foot the bill.
Mallaby’s belief that the hedge fund model will survive the crisis and thrive in its aftermath is looking pretty good, too. In fact, he understates his case: in 2009, the top 25 hedge fund managers earned a collective $25.3 billion, more than they did in the fat years before the crash. Their comeback is a vindication for Mallaby, who did the bulk of his research for this book at a time when many pundits were proclaiming that his subject was dead and gone.
Damn it. I was pretty sure hedge funds were evil and I could sound safely denigrate them at Washington cocktail parties. For those of us with a superficial knowledge of finance, it’s really embarrassing to have conventional wisdom contradicted like that. Could someone please make sure it doesn’t happen again?
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