Washington Post: Hedge Funds Also Caught in Tempest [1]

This year has already been the worst in at least a decade for the $2.5 trillion hedge-fund industry, associations say. But last week's collapse of Lehman Brothers and an unexpected, temporary ban by the Securities and Exchange Commission on the short selling of financial stocks -- a widespread hedge-fund practice that bets a share price will fall -- sent shockwaves through the industry. Several funds are now teetering.

Unregulated and secretive about their trading strategies, hedge funds have enormous sway over the markets. Industry groups say they are responsible for more than a third of stock trades. Some market analysts worry that a collapse of a major fund could shake confidence in an already fragile financial system.

The house of cards continues to fall...