When the Lilliputians came upon the sleeping Gulliver, they didn’t know if he was friendly or hostile, but he was so big it seemed prudent to tie him down. Should the 9,000 hedge funds — the secretive investment pools controlling

.4 trillion in assets — be treated the same way?

The President’s Working Group on Financial Markets doesn’t think so. In a late-February report, the group, chaired by Treasury Secretary Henry M. Paulson, urged vigilance but concluded that new regulations are not needed. The freewheeling world of hedge funds and their cousins, private equity and venture capital, have for now escaped the tightened oversight imposed on publicly traded companies after Enron and WorldCom.

Was this the right decision?…