Fed Expected to Drag Hedge Funds Into Plan to Halt Next Lehman

by Jesse Hamilton

Hedge funds, insurers and other companies that do business with Wall Street megabanks are expected to pay a price for regulators’ efforts to make sure any future collapse of a giant lender doesn’t tank the entire financial system.

The Federal Reserve is set to propose so-called stays on derivative contracts that would prevent counterparties from immediately pulling collateral from a failed bank. The plan to be released Tuesday is meant to give authorities ample time to unwind a firm, hopefully heading off the frantic contagion that spread through markets when Lehman Brothers Holdings Inc. toppled in 2008.

Continue Reading at Bloomberg.com…