From the New York Post:
HOUSE SET TO HOLD HEDGE FUND HEARINGS
Hedge funds will come under scrutiny next week when two separate House panels hold hearings on the government’s oversight of the lightly regulated sector.
House Financial Services Committee Chairman Barney Frank (D-Mass.) said he will hold a July 11 hearing on hedge funds to learn how federal overseers “monitor systemic risk related to hedge funds and how that process might be improved.”
A separate July 11 hearing planned by a subcommittee of the House Oversight and Government Reform Committee may yield more pointed questions. Rep. Dennis Kucinich (D-Ohio), who chairs the subcommittee, told CNBC last month that “when you have this huge amount of capital that is unregulated, there is a potential that investors could end up losing mightily because no one asks.”
…
Turmoil in the market for subprime mortgages may be fueling new questions. One area of concern for the SEC is how hedge funds value their assets. Hedge funds sometimes invest in complex packages of loans known as collateralized debt obligations, which can be difficult to price because any valuation involves making estimates.
From the New York Post:
HEDGE HORROR LANDS IN DENVER
Another day, another hedge fund casualty of Wall Street’s subprime mortgage debacle.
Braddock Financial Corp.’s $300 million Galena Street Fund, the most recent victim of the collapse of subprime mortgage bonds, notified investors earlier in the week that it will be closing its doors.
The Denver-based Galena Street fund appears to have fallen prey to the investor panic surrounding default-ridden subprime bonds. Shocked and scarred investors – prompted by the collapse of two Bear Stearns hedge funds – have been yanking assets from the hedge funds that invest in these bonds.
In turn, the hedge funds have been flooding the market with subprime mortgage bonds in order to raise cash needed to return to investors. That has driven down prices across the board, depressing fund performance and making the bonds less attractive as collateral for loans.
Investors are expected to learn over the next two weeks just how much damage hedge funds have sustained as a result of the subprime mortgage mess, and if the news is as bad as some market players expect, there is a fear that investors could pull out in droves.
Already, some wide swaths of the $6 trillion mortgage-backed securities market have sold off sharply, adding to the concern that there could be many more Galena Street scenarios forthcoming.
Holy Cow — it’s “Mind Control Satellites” Kucinich entering the housing bubble fray:
http://www.fas.org/sgp/congress/2001/hr2977.html
(see Section 7)