Hung Up on Hedge Funds & Capitol Hill

After sitting down with Paul Atkins, a Republican commissioner at the SEC, it became clear that many in Washington D.C. are simply hung up on hedge fund regulation.

Atkins, who served the SEC from 1990-94 and was re-appointed in 2002, has a practical view of regulation: The SEC should focus on protecting the most investors. And that would mean mutual fund investors. Atkins told me, "There are 90 million investors in mutual funds and I think that ought to be the SEC's prime worry ... there might be at the most 200,000 people invested in hedge funds and those are wealthy individuals -- people who have the means to hire folks who can help them monitor their investments."

He says the SEC now has its priorities straight, after what he has called "the brief regulatory escapade" the agency went on during its pursuit of registration requirements. And it seems other departments and agencies of the government are taking a reasoned and measured approach to new rules. The President's Working Group on Financial Markets (PWG) -- comprised of representatives from the SEC, Treasury, the Commodities Futures Trading Commission and the Federal Reserve-- released hedge fund guidelines a few weeks ago, essentially concluding that existing regulations are sufficient.

So given the SEC's stance, and given the PWG's findings, what is Congress' goal in holding its hedge fund hearings tomorrow?

When I asked, Atkins diplomatically replied, "I would never say Congress is wasting its time." But then added, he thinks our elected representatives will find that "things are in pretty good shape."

What do you think?

Questions? Comments? PowerandMoney@cnbc.com