Washington Won't Stifle Wall Street in '09

Despite lots of talk of the regulatory zeal expected to grip Washington in 2009, the real impact on battered Wall Street is likely to be more muted than it would initially appear.

From money manager Bernard Madoff's alleged $50 billion Ponzi scheme to the exotic derivatives blamed for the meltdown in the financial sector, critics of a long era of deregulation have no shortage of examples to bolster their argument that it must come to an end.

But while President-elect Barack Obama recently said those overseeing the financial system have been "asleep at the switch," his choice to lead the Securities and Exchange Commission, Mary Schapiro, was hailed as a "tough, but fair" regulator with experience across several agencies.

"There's no question lots of reforms will be proposed. Who knows what will actually pass," says John Coffee, a professor at the Columbia University School of Law who specializes in securities matters.

Regulation for hedge funds has been a goal of many regulators and members of Congress for some time. The Madoff scandal is sure to move the issue to the front burner, according to a report from Brian Gardner, analyst at KBW Securities. The report notes that courts overturned a Securities and Exchange Commission rule requiring that hedge funds register with the commission several years ago on the grounds that the SEC lacked the authority to make such a requirement.

"We think we have moved past merely requiring hedge funds to register with the SEC. We think Congress will look to provide the SEC with the ability to examine and supervise hedge funds," the KBW report states.