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Government Bailout to Protect Bernie Madoffs

Imagine you're a hedge fund broker about to be exposed as a fraud.  Your clients are demanding their money.  But you don't have it.  You've spent it all, ala Bernie Madoff.  What do you do?  Like Madoff, you could admit that you're broke, and turn yourself in.  Or you could borrow money from the government in order to pay back investors, thus delaying (or maybe avoiding altogether) your exposure as a fraud:Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200bn programme intended to support consumer credit.The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before ...continue to full post

Full post as published by Crime & Federalism on January 05, 2009 (boomark / email).