McCreevy defends decision not to regulate hedge funds

G7 finance ministers said that hedge funds "contributed significantly to the efficiency of the financial systems". But they added that activities were becoming "more complex and challenging" and "given the strong growth of the hedge-fund industry and the instruments they trade, we need to be vigilant".

German Labour and Social Affairs Minister Franz Müntefering compared hedge funds to "locusts" and called for more regulation and transparency. He said: "I think we need rules that ensure that this industry, this modern form of capitalism, respects the requirements of the social market economy."

French presidential candidate Nicolas Sarkozy called for an introduction of a European tax on speculative capital movements. He told the Financial Times: "Who can tolerate a hedge fund buying a company with debts, firing 25% of its staff and then reimbursing them by selling it in pieces? Not me."

Federal Reserve Chairman Ben Bernanke warned US authorities not to impede on financial innovation by over-regulating hedge-fund industries. Bernake said: "I would be very reluctant to get involved in heavy-handed, direct regulation of hedge funds." 

He added: "One of their key characteristics is that they are very nimble and that is good for the economy, because they help to create liquidity in markets, they help to spread risks around more broadly, and a regulatory regime that inhibited that flexibility and nimbleness would eliminate a lot of the economic benefits."