Hedge Fund Manager 'Less of a Capitalist'

by Dollars and Sense

One of our interns, Chris H., found this nugget at footnoted.org, about a talk that veteran hedge fund manager Michael Steinhardt made at a Brandeis University event at the Harmonie Club in New York City recently. His admission that the financial crisis and its aftermath had made him "less of a capitalist" is interesting. I wonder what exactly he means by that? The idea that the aftermath of the crisis is a "punishment-free period" gives a clue: capitalism should punish failures, and the gov't has not allowed that to happen, or has failed to play its assigned role of making sure that it happens. His allusion to Joseph Schumpeter, via the notion of "creative destruction" is also interesting, as is the overheard comment mentioned in the last paragraph. —cs

Of particular interest to footnoted readers were Steinhardt's comments on the SEC losing its way (he also said the Department of Justice had too). He also said that the current period has "made me less of a capitalist" because so far at least, it has been a "punishment-free period." That's particularly interesting given Steinhardt's personal history with regulators. Some might remember that back in the early 1990s, Steinhardt settled with the SEC and DOJ over an investigation over T-bills, personally paying over $50 million in fines. He said the money management industry had "failed miserably" and that hedge funds were "no longer a place for the best and the brightest".

During the talk, he kept returning to the theme that everyone is a product of the last tick. So with markets going up since early March, there's an expectation that they will continue to go up. Ditto for back in September, when things started imploding. But the contrarian—and it would be hard to describe Steinhardt as anything but—doesn't follow the crowd. Steinhardt also kept returning to the theme of creative destruction and said that while some companies had been allowed to fail, there was "no appetite for short-term pain" like allowing GM to fail.

Afterward, as I stood in line to introduce myself, I heard the guy behind me—a fellow alum—say, "It must be nice to make a billion bucks and tell everyone else that they have it all f-ing wrong." Needless to say, he didn't say that to Steinhardt directly.

Read the whole post.

Labels: capitalism, hedge funds, Joseph Schumpeter, Michael Steinhardt, punishment

 

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5/28/2009 01:58:00 PM