A hedge fund run by large investment banking institution Bear Stearns and based on bets in the mortgage market has reportedly been hit with tremendous losses and now faces calls by creditors. Yesterday Merrill Lynch seized assets from the firm and sold them in a tepid auction.

One issue brought up in this process is, how widespread will the malady in the mortgage and housing market become? Financial services firms and banks could easily wind up with stunning losses on a large portion of their investment portfolios if investment vehicles continue to become increasingly illiquid.

Be wary and protect your finances while things remain relatively calm.

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Filed under: Economics