WASHINGTON, Nov. 13 (UPI) -- A U.S. House committee Thursday reviewed hedge funds, which the panel's chair called "virtually unregulated."
Because they aren't required to report on their holdings, leverage or strategies, "hedge funds are virtually unregulated," said Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform. "Regulators aren't even certain how many hedge funds exist or how much money they control."
That segment of the financial industry is "growing rapidly," Waxman said, adding he was concerned that hedge funds, as other financial sectors, could collapse.
"We also know that some hedge funds are highly leveraged," he said. "They invest in assets that are illiquid and difficult to price and sell rapidly."
Thursday's hearing was the latest Waxman called on aspects of the U.S. financial crisis.
"In our prior hearings, we have focused on what went wrong in the past," he said. "Today's hearing lets us ask what could go wrong in the future so we can prevent damage before it occurs."
Ranking Republican member Thomas Davis of Virginia said hedge funds were originally "purely private gambles" by investors, but now "pose very public peril when the bets go bad."
"Designed as a strategy to reduce investment risk, hedge funds now compound risk when complex deals start to unravel and throw off unintended consequences," Davis said.
Among those testifying were George Soros, chairman of Soros Fund Management, who said hedge funds were "an integral part of the bubble. But the bubble has now burst and hedge funds will be decimated."