WASHINGTON (HedgeWorld.com)–Federal Reserve Chairman Alan Greenspan repeated his support for continued loose regulation of the hedge fund industry, citing hedge funds’ role in keeping the economy flexible and more stable.

In testimony June 15, before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Mr. Greenspan underscored his support for letting hedge funds operate as is, provided retail investors are not involved. He had told the same committee in February that he doesn’t believe hedge fund managers should be required to register with the Securities and Exchange Commission, as proposed by an SEC study (see ).

“If you start to inhibit the number of types of unregulated participants [i.e. hedge funds] in the financial markets from taking … risks and supplying … liquidity, I’m fearful that we will remove some of the flexibility in our overall system,” Mr. Greenspan said.

Earlier in his testimony, which is related to his renomination as Fed chairman, he spoke about how important flexibility has been to the strength of the U.S. economy in absorbing unexpected shocks.

As long as hedge funds don’t accept retail money and remain as vehicles for wealthy and sophisticated investors, he is against adding to hedge fund regulation. “I see no purpose in regulation and I see very significant potential loss in doing so,” Mr. Greenspan said.

PBarr@HedgeWorld.com

Contact Robert F. Keane with questions or comments at:

bkeane@ia-mag.com.