Word: borrowing
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HedgeFund.net estimates that the funds lost $93 billion in the first three months of the year alone. But Gradante says things really unraveled in the past month or so, as investment banks, feeling a capital pinch, started to require that hedge funds pay back their loans. The funds typically borrow money to buy stocks or bet against them in order to increase their returns. Hedge funds were then forced to sell their positions, often at a loss, in order to pay back what was owed. What's more, many investors began getting nervous and pulling their money...
...International graduate students are apt to be affected most by the change. CitiAssist allowed foreign students to borrow without a cosigner, while most similar programs require that a U.S. citizen or permanent resident cosign the loan...
...theory, these programs should directly reassure businesses and banks that it's safe to borrow and lend. But the programs are not directly funded by the government, and rather will function as insurance paid for by premiums paid by the banks themselves. It may work, but it's not the same as having full taxpayer guarantees...
...Despite interest-rate cuts last week in the U.S., Europe and Asia, businesses throughout the world are finding it nearly impossible to borrow and money-market rates remain abnormally high. In Hong Kong, for example, the one-month interbank offered rate, the benchmark for short-term bank lending, rose to 5% last week even as the city cut its policy rate from 3.5% to 2.5%. Banks remain leery of lending in the face of further financial-industry failures...
...That doesn't mean that Beijing will be writing a blank check for Washington as it begins the process of raising the $700 billion the Treasury Department has been authorized to borrow to stabilize markets. As Beijing-watcher Will Wo Lop Lam wrote recently, Chinese leaders are expecting the U.S. to make large concessions in exchange for Beijing's financial support. These concessions may include guaranteeing Chinese investments in the U.S. (such as the roughly $300 billion of Fannie and Freddie May debt it owns). Demands could extend to non-financial areas. Beijing protested recently after the U.S. stationed...