Video: Hedge Funds and the Global Economic Meltdown

"Short selling hedge funds lit the spark that led to the global economic meltdown. Now they want to help craft the laws Congress will pass to fix our broken regulatory system. That's insane. "

Some freinds posted this video and I commented on it:

Right off the bat you can detect the slant and inaccurracies when video wonders how run on Bears stock could happen with them holding plenty of liquidity. Easy. Lack of confidence. That's how runs happen, especially on banks.

Looks to me that the tremendous short selling was due to insiders knowing collapse was around the corner. No evidence is presented to show how it couldn't have been that.

Also, I don't think Lehman's collapse was any trigger by itself. Credit markets were stable for a week afterwards (looking at the TED spread and Libor rates) then Treasury announced it's rescue deal--and it wasn't recieved too well by congress or markets. Officials further talking it up made it all worse and the they appeared directionless with saving some firms and letting others fail.

Then more bad news on economy and Freddie and Frannie going into recievership. Money started leaving markets, flying to saftey. In Sept. two commercial paper money market funds broke the buck, and it's right after that everyone freaked out and market plunged.

besides, short selling couldn't have caused the Fed to keep interest rates at 1% all these years, nor could SS cause all those ivy-league investors running those big funds to pour billions into these mortage bundles, nor SS cause rating agencies to put AAA on everything that came into their in-box, or cause federal and state regulatory agencies to sit on thier butts all day and do nothing, and so on...

I said before, who knows full story behind this crisis? Only now are studies being done and papers written. It will be at least a year before any consensus develops among analysts. The 1987 crash was much simpler event and up to 2 years later experts were still debating it's causes Now it's fully understood by all and taught at every finance school...