Hedge funds--another savings-and-loan bailout, or even 1929, waiting to happen

The subject is mine. This article scares me.

The actual title is: Hedging Bets
http://www.thenation.com/doc/20070702/stancil

http://www.nytimes.com/2007/06/21/business/21bonds.html?_r=1&hp&oref=slogin


Bear Stearns Staves Off Collapse of 2 Hedge Funds
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By VIKAS BAJAJ and JULIE CRESWELL
Published: June 21, 2007
The high-stakes game of brinksmanship began early yesterday on Wall Street, and continued throughout the day. Bankers traded telephone calls, frenetically negotiating the fate of two hedge funds.

All wanted to avoid a fire sale in the troubled mortgage-securities market, but at the same time, not get stuck with an exploding liability that could result in steep losses. The day ended with deals that appeared to have forestalled a meltdown. But questions remained about how successful they were and whether they had merely delayed the inevitable.

As the morning unfolded, lenders to two hedge funds at a unit of Bear Stearns, the investment bank, tried to ascertain what they could expect if they auctioned off mortgage securities with a face value of up to $2 billion. The solicitations were hastily withdrawn when investors reacted with little enthusiasm. But by the end of the day, some of the less-risky securities did change hands.

At the same time, several lenders, including JP Morgan Chase, Goldman Sachs and Bank of America, reached deals with Bear Stearns that forestalled a need to sell securities in the open market. It appeared that some lenders pulled back over concerns about the effect that a large liquidation would have on bond prices and investor confidence. While the securities involved represent a fraction of the market, a liquidation could have forced a bigger sell-off while setting a lower price.

SO I dont know where to 1 or 3 trillion come from, looks a tad low to me.

due in part, they say, to a particular hedge fund company.