"A group of the largest US hedge funds has called on the Bank of England to intervene to free an estimated $65bn (£38bn) in assets frozen in London in the collapse of Lehman Brothers, warning that delays “could be disastrous for UK plc”.
The funds, through the Managed Funds Association, said the scale of the problem was so great that it could undermine bank rescue plans as tens of billions of dollars would be kept out of the market. It was also likely to lead to the failure of some fund managers, said Richard Baker, chief executive of the MFA. The warnings come as hedge funds have been quietly shifting billions of dollars of assets out of London to the US, claiming that the US legal system provides greater protection."
This story seems strangely familiar. It vaguely reminds me of the non-dom tax fiasco. The basic outline goes something like this:
So what about this "grave danger" to UK PLC. First, hedge funds are not deposit taking institutions. If they fail, only the investors and the fund managers lose. There is no threat to the payments system. Hedge funds are not banks and any direct threat to the real economy is minimal.
Second, Lehman assets are frozen because Lehman is bankrupt. This country has bankruptcy laws in order to protect the legitimate interests of creditors. For the government to "intervene" and unfreeze Lehman assets would be an intolerable intervention into the legal process.
As for hedge funds "quietly" shifting their funds to the US, it is their money and they can do what they like with it. If hedge funds feel their interests are better served by moving their money abroad, then I wish them well. Beyond that, it is not for the government, or me, for that matter to have any opinion on the subject.
However, I am outraged how the city repeatedly uses the media to pressurize this government in such a blatant and corrupt manner. I am even more outraged that the goverment always seems to bow to this self interested rubbish.