Federal Reserve Chairman Alan Greenspan told the Senate Banking Committee yesterday that he did not believe hedge fund advisers should be registered by the Securities and Exchange Commission, noting that “I think that while they have a reputation as being a sort of peculiar type of financial group, I think they’ve been very helpful to liquidity and hence internal flexibility of our financial system.” He did, however, caution that “we have to be careful” hedge funds do not become an investment vehicle for people of lower and moderate incomes.
Greenspan also said he supported making President Bush’s tax cuts permanent. As for his concerns about the budget deficit, Greenspan said, “It is crucially important that we try to find, wherever we can, reductions in outlays before adverting to the question of revenues to fill in the gap. I think that the budget deficit problem needs to be resolved primarily or fully on the expenditure side.”