Funds Find One Bet They Can't Hedge: Trust

It's 1998 all over again as Bear Stearns buckle triggers panic
By Peter Fearon,  Newser Staff
Posted Jul 4, 2007 9:35 AM CDT
'   (Associated Press)
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(Newser) – The recent collapse of two Bear Stearns hedge funds, and the resulting informal SEC investigation, have once again placed the complex system and its impact on markets under the spotlight. The Washington Post delves into the history and ethos of the powerful funds, comparing them to the Wizard of Oz in both secrecy and influence.

As hedge funds capture an ever-larger piece of the pie, they may be taking risks that put the entire financial system in jeopardy—but few people know enough about them to stop it, the Post concludes. "I don't think anybody knows how much leverage has grown," says one former hedge fund manager: "Something can go wrong all of a sudden."