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Reuters – Fundraising by new European hedge funds may be picking up, according to an industry survey, after hitting a record low in a first half of the year overshadowed by the Madoff scandal.
The survey, released on Monday by data group EuroHedge, shows $2.09 billion (1.26 billion pounds) was raised in new funds in the first six months of 2009, the lowest in the poll’s 10-year history, while 47 new funds were launched.
A year ago 106 funds were launched, raising $10.8 billion, including $2.5 billion raised by the Brevan Howard Multi-Strategy fund.
Chicago Tribune – "The key change in the next decade is that policymakers around the world have chosen the winners and losers," Griffin said at a Wednesday panel. "The winners are the banking system."
By selecting commercial banks to become the centerpiece of the financial industry, the government closed the era of investment banks and hedge funds with highly leveraged balance sheets.
That should translate into safer and more conservative investing choices, but also less innovation by financiers and higher interest rates for borrowers, he predicted.
As roughly 8,000 hedge funds respond by reducing the size of their multitrillion-dollar balance sheets, their role in the system will inevitably be diminished, Griffin said.
Reuters – On Main Street, insurance protects people from the effects of catastrophes.
But on Wall Street, specialized insurance known as a credit default swaps are turning a bad situation into a catastrophe.
When historians write about the current crisis, much of the blame will go to the slump in the housing and mortgage markets, which triggered the losses, layoffs and liquidations sweeping the financial industry.
But credit default swaps — complex derivatives originally designed to protect banks from deadbeat borrowers — are adding to the turmoil.
"This was supposedly a way to hedge risk," says Ellen Brown, the author of the book "Web of Debt."
Montreal Gazette- IndyMac Bank is under investigation by the FBI for possible fraud involving home loans made to risky borrowers, the Associated Press reported yesterday, citing an unnamed law enforcement official.
The report said it was not immediately clear how long the FBI’s probe of the bank has been ongoing but the probe is focused on the company and not individuals who ran the thrift institution.
U.S. banking regulators seized mortgage lender IndyMac Friday after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.
New York (HedgeCo.Net) – In an effort to stabilize U.S financial markets and prevent further turmoil in the economy, Federal Reserve Chairman Ben Bernanke suggested expanding its control and authority over our country’s financial firms.
Bernanke spoke at a Federal Deposit Insurance Corp. conference regarding the improvement of mortgage lending yesterday, where he explained they were “currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail in dealer funding markets."
Citing strains on short term funding markets, Bernanke said that the Federal Reserve will continue to improve the clearing and settling of default swaps and other derivatives. The economy took a blow last summer when borrowers started defaulted on subprime mortgages, causing the values of many securities to plummet in value.
“We aim not only to make the financial system better able to withstand future shocks, but also — by reducing the range of circumstances in which systemic stability concerns might prompt government intervention — to mitigate moral hazard and the problem of ‘too big to fail’," he explained.
Too big to fail of course referring to the Bear Stearns collapse and the subsequent rescue by JPMorgan that was backed by the Fed and $30 billion. Bernanke added that they may extend its emergency credit facility program into 2009, which provides financing to large investment banks and other financial institutions.
Amidst much criticism, Bernanke defended his stance on the Bear rescue in March when he explained how a default by Bear could’ve been “severe and extremely difficult to contain,” alluding to a domino effort.
Touching on the topic of mortgage lending, Bernanke says the Fed plans to launch a crucial rule on mortgage lending that will apply to all lenders. It will be voted on at the Fed’s board meeting on Monday.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Ventura County Star- More than 400 real estate industry players have been indicted since March, — including dozens in the last two days — in a Justice Department crackdown on incidents of mortgage fraud that stem from the country’s housing crisis.
The FBI put the losses to home-owners and other borrowers who were victims in the schemes at more than $1 billion.
"Mortgage fraud poses a significant threat to our economy, to the stability of our nation’s housing markets and to the peace of mind of millions of American homeowners," Deputy Attorney General Mark Filip said at an afternoon news conference.
