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market liquidity and credit risk, improved credit risk estimation techniques, and more disclosure of risks to dealers and regulators.

The key point of difference between the President's Working Group and the Group of 12 was the issue of whether information should be disclosed only to regulators (Group of 12) or to the public.

The General Accounting Office criticized the President's Working Group. The GAO wanted the SEC/CFTC to have regulatory authority similar to the Federal Reserve in regulating banks.

There have also been a number of congressional regulatory proposals in the United States. The Hedge Fund Disclosure Act (HR 2924), also known as the Baker proposal, suggested that hedge funds over $3 billion in assets file quarterly reports to the Federal Reserve. These reports would detail such things as the assets of the fund, derivative positions, and leverage ratio. The issue is that this proposal would affect only the largest hedge funds. Some critics also question whether the costs of compliance and information gathering are greater than the value of the information gathered. The proposal had initially been referred to the House Agriculture Committee on September 23, 1999, and then the Subcommittee of Risk Management. There are no plans to introduce the bill into the 107th Congress.

In October 2000, the House of Representatives passed a bill designed to reduce risk in the financial markets and the banking system. The bill concentrates on preventing a domino-effect collapse in the financial system rather than on policies and practices within hedge funds. The bill focuses on the valuation methods of derivatives contracts for bankruptcy court–protected investment firms and banks. Currently the gross value of losses from derivatives trading is used. The new bill allows these parties to use the net value, which is much smaller. The proposed method will also speed up bankruptcy proceedings.

In mid-February 2000, a group of five large hedge funds—Soros Fund Management, Moore Capital Management, Tudor Investment Corporation, Caxton Corporation, and Kingdon Capital—issued their own guidelines as a response to the President's Working Group. Guidelines included establishing risk monitoring systems that are independent from portfolio managers, and having managers perform periodic stress tests to determine how changes in market conditions would affect their portfolios, develop and monitor several measures of risk, and make periodic reports to lenders and counterparties. They