Hedge funds are typically only open to superrich investors, in part because of their high risk, and hold much of the market for betting against the stocks of certain industries or companies.
"The documents show how Wall Street banks were middlemen in trades with hedge funds and AIG that left the giant insurer holding the bag on billions of dollars of assets tied to souring mortgages," the Journal's Serena Ng reported.
"AIG has put in escrow some money for at least one major bank, Deutsche Bank AG, whose hedge-fund clients made bets against the housing market, according to a person familiar with the matter. The money will be released to the bank if mortgage defaults rise above a certain level."
"In essence, while the U.S. government is busy trying to prop up the housing market -- by trying to limit foreclosures, among other things -- it is simultaneously putting up cash that could be used to pay off investors who bet housing prices would tumble and many mortgage holders would default," Ng added.
Read on.
Read on.
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