Hedge funds have generally been stable during the credit crisis the U.S. Treasury's top domestic finance official said.

Hedge funds have endured a period where many people were critical and afraid, Treasury Undersecretary Robert Steel said in a speech to the Managed Funds Association in Chicago. Today your industry has been validated as a critically important player in global capital markets. With that privilege comes new responsibility.

Steel said the funds should abide by the guidelines two Treasury-appointed panels recommended in April to improve transparency in the aftermath of the rout in credit markets.

During the speech, he reiterated comments by Treasury Secretary Henry Paulson that the economy faces a trio of headwinds from the housing recession, credit crunch and high energy prices.

We are optimistic that conditions will continue to improve, but not in a straight line, he said. There is still significant de-leveraging occurring in our markets today, and we recognize that this process will take additional time.