Soros urges regulation for hedge funds

The Hungarian-born billionaire financier said that hedge funds would be best regulated through the banking system by requiring banks that lend to them to hold greater reserves... "I think there are some hedge funds that have been operating as unlicenced insurance companies by writing credit default swaps," he said.

Normally we are suspicious about calls for regulation, but in this case Soros has as point: banks are already backstopped by the public, so shouldn't they interact responsibly with hedge funds? We think the picture would be much different if banks reduced rather than exaggerated the excess leverage and unsound insurance aspects of hedge funds.