The Financial Times is reporting that Morgan Stanley is implementing
systems that tie the prices of credit insurance on their own debt to
their commitment to provide financing to their hedge fund clients. The
shift would allow the bank to pull out from its funding commitments
should it run into a crisis of confidence like that which wiped out Bear
Stearns in only a matter of days. Goldman uses a similar arrangement
that ties its lending commitments to the firm's own bond prices.
A
source inside one of the firms told the FT that: "the message is that
'if our firm is in trouble, we would rather fund ourselves than fund
you [hedge funds].'" -- George White
See story from The Financial Times
