Chanos Skeptical of Financial Reform

Hedge fund manager Jim Chanos questions whether the financial industry reform bill in the Senate would do much good to fix Wall Street.
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NEW YORK (TheStreet) -- Jim Chanos is skeptical that the regulatory reform bill now stymied in the Senate would do much to repair the financial sector anyhow.

"It doesn't go far enough," the legendary short-seller and hedge fund manager said Tuesday night, when

TheStreet

asked about his view of the bill and its impact on financial stocks.

He stressed that the reform measure is far from a done deal; Republicans blocked a procedural vote

for the second time Tuesday

. Meanwhile, industry lobbyists -- and even

Berkshire Hathaway's

(BRK.A) - Get Report

Warren Buffett

-- are elbowing each other out of the way to effect changes to the bill.

"There's still too much uncertainty," Chanos said. There's no way of telling what 'carve-outs' the industry will garner, from derivatives trading to the Volcker rule, or a fee for being in the Too Big To Fail Club.

Chanos and a few other financial hot shots led a panel discussion Tuesday evening at Merrill Lynch offices in midtown Manhattan. Other featured speakers were Margaret Cannella, who was a top fixed-income analyst at

JPMorgan Chase

(JPM) - Get Report

; Diane Garnick, an investment strategist at

Invesco

(IVZ) - Get Report

; and Ed Grebeck, CEO of Tempus Advisors, who once structured investment vehicles in

General Electric's

(GE) - Get Report

capital finance arm.

The event, sponsored by academic groups, sought to glean lessons from experts on how they survived the credit crunch and have thrived since.

Chanos, perhaps the most cynical of the group, took a hard line on nearly all parties -- regulators, ratings agencies, big banks and investors.

In a presentation slide, he said the market has found that perhaps "Mssrs. Glass and Steagall were right after all." He said investors who lost money should've performed better due diligence and looked hopefully toward a day when ratings agencies would "be made irrelevant."

Chanos also called the need for higher capital requirements "a no-brainer" and said that the recklessness of Wall Street's heyday must remain in the past.

"That's the real problem we have with enormous leverage and risk-taking. ...We have to move away from a system where it's heads I win, tails the taxpayer loses," said Chanos.

Chanos, who founded Kynikos Associates in 1985, gained his reputation as a savvy investor by spotting accounting problems at Enron far ahead of the Street. As a veteran short-seller, he was hauled before Congress during the financial crisis to discuss how those bets contributed to the huge selloff in financial stocks.

He didn't say much about his view of the financial sector today or his most recent trading philosophy that many China-related assets are overvalued. He did, however, indicate some bitterness about problems being pinned on shorts who recognize improper valuation ahead of the pack.

"Shooting the messenger does not change reality," said Chanos, pointing out that financial executives pleaded with legislators to curb short-selling and ease accounting rules after receiving multibillion-dollar bailouts. "It's remarkable to me that that was first on their minds."

Written by Lauren Tara LaCapra in New York