Hedge Funds Need Not Fear Congress, Says Chanos

Congress is holding three different hearings Wednesday to weigh increasing regulations and taxes on private equity and hedge funds. So why is James Chanos, founder and president of Kynikos Associates, so calm? He joined "Morning Call" to explain why he doesn't fear "heavy-handed" legislative actions.

Chanos, who chairs the Coalition of Private Investment Companies, told CNBC's Michelle Caruso-Cabrera that lawmakers have a better understanding of his business than many analysts fear.

"The industry ... has done a pretty good job educating lawmakers. The dialogue has gotten much better on what hedge funds are, what they do -- and why they're important," Chanos said.

He said Congressmen like Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, comprehends "what is good regulation and what is heavy-handed."

Besides, Chanos said, the tax-increase proposals "would fall more heavily on our venture capital brethren than on hedge funds." He explained that the proposed hikes focus on changing long-term capital gains reallocation -- and "a lot of hedge funds have more short-term capital gains."