Kathryn Young: It sounds like the financial regulation bill is going to be coming out in its completed form. What are you hoping to see from that? I think it's a pretty passionate issue for you.
Cliff Asness: I'm hoping to see them forget to sign it. You know, finish the whole thing and just – actually I'm hoping that, it's just a very slim hope.
I can't pretend that I'm a regulation guy, I'm not. I'm a small government guy. Chances are any regulation you show me, I'll take the other side, and I just want to be honest about that. But there are regulations that I think are better and worse. If we have to have more regulation, and I think at least politically we have to, I would much prefer to see it be concrete in terms of rules, how much a hedge fund can lever, how much margin you have to put out for different kind of trades, what has to be on an exchange, what doesn't?
What I don't like about the financial regulation the way it seems to becoming is it's not very specific. It grants government a lot of powers, a systemic risk regulator deciding who is a major swap participant, being able to close down firms with no appeals process, based on their determination as systemic. That scares me both in terms of – I don't trust them to get it right.
We had a lot of people in government--it's funny. We always talk about a systemic risk regulator and should we have one. I think the Fed was trying last summer. I think Alan Greenspan spent a lot of time thinking about whether it's bubble, talking with everyone else. They didn't get it right. So I'm a little negative on whether we're suddenly going to be able to do this.
And then the politicization – when you play this on your website, make me say that right. But I'm very worried about the politics going forward because the more government – not just power, but very arbitrary open-ended power.
I wrote an editorial with a colleague, Aaron Brown. He is one of my good friends and colleagues; I should get that right on the film. And it was in the Wall Street Journal a few weeks ago, and we talked about – one of the things we said, and we were very blunt – and just for the record, we don't mean us in particular, we mean everyone. When you find a politician who is at all involved with systemic regulation and they come around asking for a donation, how much harder is it going to be to say no in the future than in the past?
So this general rise of what we would call and a lot of people call crony capitalism in this open-ended power, I'm not pleased with that, I'll tell you. To the extent we needed a bill, I would have rather see them try to work these things upfront rather than just grant themselves more powers in the future. And it doesn't look like it's going to work out my way, and we're going to live in the world as it is.