The European Commission (the EU's law making apparatus) is going after hedge funds as the root of all financial evils. Unfortunately they are not the root of evil, but an easy target for political purposes.
Stephen Fidler writes in the WSJ:
The crisis originated with banks, the traditional and supposedly the most heavily regulated sector of the financial economy. Hedge funds, as Adair Turner, chairman of the U.K. Financial Services Authority, found, "did not play a significant role in the crisis."
But that hasn't stopped some European governments and politicians from behaving as if they had. Hence the proposed legislation on alternative investment funds that is currently meandering its way through the European Union law-making machine. The original proposal that came out of the European Commission in April was "one of the most political documents I've ever seen come out of here," said one commission official.
The reason it was so political, according to this person and others, that the funds were long-standing betes noires of the French and German governments and heartily hated by many members of the European Parliament. The funds were viewed on the continent as extending their malign tentacles into the European economic fabric from their lairs in London and New York.
Read the rest here.