Here is an interesting atricle found on www.slate.com . It concerns the bailing out of hedge funds which recently suffered major losses.

"But now Bear Stearns has finally joined the club. Last month, facing a crisis at two large hedge funds run by its asset management unit, Bear Stearns agreed http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aYDTeHYnV3ms to bail out one of the funds (and its many creditors) by providing a $1.6 billion line of credit. The move, intended to spare Bear Stearns embarrassment and protect the reputation of its asset management business, also had a take-one-for-the-team result. It insulated fellow Wall Street firms from losses and prevented widespread damage to similar hedge funds.
The details of the Bear Stearns rescue may fascinate only those who devour the Money & Investing section of the Wall Street Journal. But because it reinforces the notion that the big boys get pampered when their investments go bad, the bailout should resonate.

The two Bear Stearns hedge funds ran into trouble by borrowing heavily to invest in CDOs (collateralized debt obligations), investment vehicles that hold bits and pieces of subprime mortgages. (Wall Street's Jungle http://www.online-literature.com/upton_sinclair/jungle/ -esque food-processing machinery chops and dices mortgages like clams, into strips, bellies, and other parts, and peddles them to investors with different appetites for risk.) This year, the value of many of the assets in CDOs has fallen as delinquency rates on subprime mortgages have risen to record levels. According to the Mortgage Bankers Association http://www.mbaa.org/NewsandMedia/PressCenter/55132.htm, in the first quarter of 2007, 5.1 percent of subprime loans were in foreclosure and a whopping 15.75 percent were delinquent.

Here is a link to the entire article:

http://www.slate.com/id/2169759/nav/navoa/

Mike