More on Hedge Funds

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MORE ON HEDGE FUNDS….Via Atrios, Nouriel Roubini provides a potted history of the Great Financial Crisis of 2007-08. I’ll skip right to the good part:

The first stage….The next step….The third stage….The fourth stage….The next stage will be a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds can redeem their investments on a quarterly basis; thus a bank-like run on hedge funds is highly possible. Hundreds of smaller, younger funds that have taken excessive risks with high leverage and are poorly managed may collapse. A massive shake-out of the bloated hedge fund industry is likely in the next two years.

Hedge fund apologists have been pretty smug about how all our current problems have been caused by investment banks, which are (lightly) regulated, and none at all by the big bad hedge funds, which operate with no regulation at all. And so far they’ve been right. But does anyone believe this is going to last? And what will Bernanke and Paulson do if and when a systemic rout in the hedge fund market threatens to undo their bailout plan? Will they bail out the hedge funds too?

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IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

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This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

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