Re “The Great Seduction” (column, June 10):
While David Brooks makes some good points about debt and thrift, he paints with a broad brush an unwarranted negative picture of recent financial innovation.
Mr. Brooks states that “Bill Gates built a socially useful product to make his fortune,” but then writes, “But what message do the compensation packages that hedge fund managers get send across the country?”
But hedge fund managers perform many “socially useful” functions for shareholders, consumers and the economy. They play a vital role in channeling capital to its most efficient uses.
Managers like Carl C. Icahn, William A. Ackman, and Phillip Goldstein have held many a chief executive’s feet to the fire, forcing these executives to create value for all shareholders.
Turnarounds at companies from the McDonald’s Corporation to Marvel Entertainment have been instigated by the activism of hedge funds.
Today, hedge funds are also playing roles similar to venture capital in the 1980s in providing seed capital to the Microsofts of tomorrow.
It’s also worth noting that hedge funds were some of the first to blow the whistle on subprime securities, short selling them for the benefit of their investors.
