Policy responses to LTCM rescue in 1998 was that only extreme leverage was the causeof the trouble and appropriate leverage and speculation which utilize short selling andderivatives gives liquidity and efficiency to the market. Leverage should be dealt byprivate counterparty discipline．Securities Exchange Commission are concerned with thegrowth of hedge funds without basic information on them. They basically regard hedgefund as useful to investors and securities market and has come up with the idea ofregistration of hedge funds, which hardly disrupt their investment activities. Hedge fundsare very American in that they naively believe that speculation motivated by greed givesmarket liquidity and efficiency.
