The mortgage meltdown has not only brought the rating agencies under the gun, but will also increase the pressure on hedge funds to be subject to more state scrutiny and regulation. This is something which nervous big investors and central bankers have been seeking and the fund companies have been strongly resisting for some time. The funds, of course, have defended themselves as vehicles which diffuse rather than aggravate risk and help markets to self correct. But the models built by their quantitative analysts have all predictably replicated each other so that everyone has effectively been a party to trades gone bad with very few counterparties at the other end to restore equilibrium.
If this is the test of the funds and their structured products which global capitalists have been waiting for with some trepidation, they can't be happy with the way in which the hedge funds and the Phd. "quants" they employ have badly flunked it. Now they are holding their collective breath to see whether the central banks still have the capacity to contain the present damage.
