Sheelah Kolhatkar, former hedge fund analyst and staff writer at the New Yorker, thinks hedge funds have enjoyed enormous unfair advantages for far too long.
In her recent book Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street, she details out how many hedge funds use financial engineering and accounting tricks — even illegal insider information — to fill their coffers at investor expense. And then they use those ill-gotten gains to influence politics.
The hedge fund industry grew up quietly out of almost nothing into this enormous force on Wall Street. There's almost $3 trillion estimated to be under management at hedge funds around the world — but hedge funds are lightly regulated, so we don’t always know what's going on in that sector.
The people who have founded many of these hedge funds have become enormously wealthy. They have become the new robber barons of our time. The most successful among them have amassed multi-billion dollar fortunes largely based on trading and extracting very large fees from their investors for trading their money.
These people now exert outside influence in our society, including as major political donors and lobbyists and in the world of philanthropy and other areas as well. So, I always like to keep an eye on that world — I think there’s a lot going on there that explains what’s going on in Washington, and we don’t always realize it’s connected.
In this podcast, Chris and Sheelah discuss the racket the hedge funds run, and as a case study, give close examination to the US government's tortured (and ultimately, unsuccessful) efforts to convict hedge fund kingpin Steve Cohen of SAC Capital on insider trading charges. Given their vast resources and paid influence, these modern robber barons remain practically untouchable.
Click the play button below to listen to Chris' interview with Sheelah Kolhatkar (44m:50s).
by pandabonium