International Herald Tribune – As world markets shudder, the hedge funds based in London, once the toast of the city’s flashy financial elite and magnets for cosmopolitan capital, have stumbled badly.

The increasingly global sweep of the credit crunch and the collapse of Lehman Brothers have punished all manner of hedge funds – secretive investment pools that rely on generous lenders and a high tolerance for risk to thrive.

But in London, where a number have already shuttered, the hedge fund retreat has a pointed resonance. Along with celebrity chefs, Russian oligarchs and Italian soccer coaches, hedge funds that established operations here in the past decade have been seen as a mark of London’s hip new spirit of decadent cool – a notion reinforced by the pound’s long period of strength and the boom in home prices.

Now, the failure of Lehman Brothers, which had deep financial relationships with some of the largest hedge funds in the world, has unsettled an already jittery market – sparking fears that some hedge fund assets might be frozen there and thus be unavailable for sale if investors choose to redeem them.

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New York (HedgeCo.Net) – Mortgage lenders Fannie Mae and Freddie Mac may get some help from the Fed in hopes of staving off a market implosion following a crippling credit crunch and a period of great stress in the financial markets.

"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Treasury Secretary Hank Paulson said.

The Federal Reserve of New York has been authorized to provide funding should it prove necessary, in which case the loans will be dispersed with a 2.25 percent interest rate.  Meanwhile, the U.S. Treasury is seeking to expand their credit line and make an equity investment if approved by Congress.  The Treasury is currently allowed to extend $2.25 billion to each company.

"This affirmation of the important role [of both companies] – and that we should continue to operate as shareholder-owned companies – should go a long way toward reassuring world markets," said Freddie Mac head Richard Syron.

The two companies back about $5.3 trillion in mortgages, about half of the total mortgage debt in the U.S.  Freddie Mac is scheduled to sell about $3 billion in short-term notes today.

Shares of Fannie Mae and Freddie Mac plummeted last week amidst investor scares, but saw a sharp rise before the bell today.  Fannie shares rose 22 percent to $12.50 while Freddie shares climbed 27.1 percent to $9.85.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Tags: abcap, american-international-group, angela-merkel, brokerages, carnage, crimes-unit, feeder, freddie-mac, henry-paulson, loan-sales, regulatory-regime