*  *  *  Chairman Frank, Ranking Member Bachus, and other members of the Committee, I appreciate the opportunity to appear today on behalf of the Board of Governors of the Federal Reserve System to discuss the systemic risk implications of the growth of hedge funds.
The Board believes that the increased scale and scope of hedge funds has brought significant net benefits to financial markets. Indeed, hedge funds have the potential to reduce systemic risk by dispersing risks more broadly and by serving as a large pool of opportunistic capital that can stabilize financial markets in the event of disturbances.