Senator Jack Reed of Rhode Island wants any investment fund with more than $30 million in assets to have to register with the SEC and disclose its positions, Politico reports.
It's hard to see how a $35 million venture capital fund or real estate fund or hedge fund could pose a systemic risk, even with a lot of leverage. They might pose a competitive risk to larger financial institutions, who might like to saddle their more nimble competitors with the costs of compliance. The giant banks like Goldman Sachs, Bank of America, and JP Morgan Chase already have less competition because of the failure of competitors like Lehman Brothers and Bear Stearns. If Mr. Reed's proposal passes, they'll also have less competition from private investment funds.
The Reed proposal goes hand-in-hand with the idea of raising taxes on carried interest -- increased taxes and regulations on firms that didn't cause the financial crisis and didn't need a bailout, in order to improve the competitive positions of the firms that did need bailouts (or take forced TARP money).
What is driving this, in addition to the competitive desires of the firms that are already large and highly regulated to hamper their smaller competitors, is not systemic risk but a generalized effort to try to somehow "get" people who earn a lot of money.
