Wednesday, June 20, 2007

Total Protonic Reversal

This could be bad.

Merrill Lynch has seized about $800 million of assets from troubled hedge funds managed by Bear Stearns, throwing in doubt the chances that the funds will survive.

The assets, which were collateral for loans made by Merrill Lynch to the two funds, are mainly bonds backed by other securities that are now expected to be sold off later in the day, a person familiar with the situation told Wednesday morning.

The question is the degree to which this is a general problem due to the subprime mortgage market meltdown. Apparently there are collateralized debt obligation assets worth trillions out there, along with derivatives which track them.