Presidential Candidates Dance Around Capitalism's Benefits

To start, the question itself isn't really a question, but an insult, and shows real economic ignorance and lack of class by Brian Williams.

As we've pointed out repeatedly over the years, hedge funds are simply pools of investment capital, the same as mutual funds or even investment clubs. The press loves to stir up a mythology that wealthy hedge funds are suspiciously "secretive" and "closely guarded," but in reality, it is government regulation, not nefarious activity, that prohibits hedge funds from being open about their work.

Ever wonder why you've never seen hedge funds advertising in any newspaper or magazine? Or why you've never been sent a postcard about a new hedge fund launch or investment opportunity? That's because SEC regulation restricts hedge funds from soliciting the public in any fashion. It also restricts all "nonaccredited" individuals from investing in hedge funds. "Nonaccredited" simply means not having a million dollars in liquid net worth, a threshold at which the government finally believes you are smart enough to know what to do with your own money.

Does Brian Williams, who also happens to be highly paid, even know that? Does Williams, who's won five Emmys, four Edward R. Murrow awards and the George Foster Peabody award, even know what hedge funds actually are? Or does he, like everybody else, just hear stories of hedge-fund managers earning huge paychecks and assume they must be up to no good?

Williams's no-so-subtle implication is that hedge funds are bad for America. He's saying, in effect, "I can't think of one single way hedge funds make America any better." With all due respect to Brian Williams, in an age of blogging and YouTube, one could easily ask the same question about network anchormen.

But while it's a rude question, it's also an easily answerable one. So how did the two senators respond?

Edwards's response was the most disappointing. "I think the financial markets are an important component of trying to figure out what it is we need to do about the fact that we have 47 million people without health care, 37 million people who wake up in poverty every day," he said. (Read the transcript here.)

Edwards doesn't answer the question, but merely redirects the inquiry toward the populist message he's undoubtedly been honing over the last four long years. What he might have offered is the notion that it's the financial markets, hedge funds and capitalism in general that we have to thank for the abundant prosperity that all Americans, even those who "wake up in poverty every day" have come to enjoy. As we wrote back in 2001, it's the American businessperson to whom the entire world should be grateful. What creates the heath care, food or shelter Edwards is so eager to give away? Vaccines don't grow on trees, but are created by profit-seeking companies — and the hedge-fund investors who finance them.

Edwards said "that we have a responsibility to the people in this country who wake up every day worried about feeding and clothing their children." Is that why Edwards was hired by hedge fund group Fortress Investment Group (FIG) in the fall of 2005, to feed and clothe the nation's children? Of course not. The role of a hedge fund is to make money, not give it away. But for Edwards, that alone is not morally acceptable. Any mention of profit must be accompanied by a guilt trip about charity and self-sacrifice.

Edwards finished by saying that "...people in New York who work in financial markets understand — in some ways, at least — what can be done and can play a significant role in trying to lift people up who are struggling."

He forgot to mention that's what Wall Street, and the very corporate America that Edwards's "Two Americas" belligerently attacks, does each and every day. The most obvious example is Wal-Mart (WMT), which, by seeking a profit, has bettered the lives of every single being on earth. As an employer, a service provider or general facilitator of trade, Wal-Mart has improved the plight of the world's poor a zillion times more than the senator's volunteer efforts at the Poverty Center at UNC.