Post-crisis, the world still needs risk capital. And if the banks must be curtailed, then independent actors such as hedge funds should have a much greater role in supplying it.By Neil Wilson
Paul Volcker is right, of course. Public money “should not be used to support risk-prone capital market activities simply because they are housed within a commercial banking organization,” as the respected former chairman of the Federal Reserve told a recent conference in Los Angeles.
But Bob Diamond, the head of Barclays Capital, has a point too. As Diamond said in a recent U.K. television interview, banks need to take risks—as well as to be properly capitalized—for a modern free-market economy to function effectively and grow.
So where should the limit be to risk-taking by