Hedge Funds Transfer Significant Risk To Investment Banks In A Crisis

Research out of the Federal Reserve Bank of San Francisco (FRBSF) points to hedge funds as being major sources of instability during a crisis in a report that confirms what many critics already believed – that hedge funds played a big role in the financial crisis by acting as leveraged counterparties to investment banks and others (h/t Zero Hedge). “Designating which financial institutions are deemed systemically important could depend on identifying to what degree distress in one institution spills over to other parts of the financial system,” writes FRBSF visiting scholar Reint Gropp in an April 14 letter. Hedge funds…