[jandg]

Should Hedge Funds Be Able to Take Over Failed Banks?

http://www.cnbc.com/id/36033994

I don't understand everything I know about hedge funds, but doesn't selling financial institutions to them essentially turn the lender into the hedge fund's piggy bank?

I realize that they'd would need to meet the capital requirements (such as they are) but is FDIC really comfortable with letting aggressive, high risk management in the door of already wobbly banks?

These are certainly interesting times.

 

[New Deal or Raw Deal]

Certainly Seems like a Odd Coupling

Hedge Funds and Banks do not seem to be a consistent pairing based upon the vastly different management styles and their general perception of risk and their overall risk tolerance. Clearly, as you mentioned, the Hedge Funds would have to meet capital requirements and comply with capital standards and asset quality for any bank they would acquire.

Some Hedge Funds are working with a vast majority of the managers own money while others operate with very little or even none of their own money and simply use everyone elses (investors) capital. The term Hedge Fund is somewhat like the term Mutual Fund in that they come in a very vast variety of investment objectives, management styles and risks.

I can't see the Hedge Fund's objective in this to be to gain access to the banks capital as struggling banks usually need more capital and depending upon the arrangement, the hedge funds would have to use their assets to prop up these struggling banks. The banks return on assets and profit margins are often seen as unexciting in comparison to the expectations of the Hedge Funds. I guess when I see who the players are, it will be easier to see the motives.