Obama Administration to Introduce Hedge Fund Regulations

It appears the Obama Administration will seek some form of hedge fund regulation this week, though it is unclear how exactly they plan to regulate the 5000 or so US based funds. Obama and Geithner also plan to ann0unce regulations that will force certain derivatives onto exchanges with clearinghouses.

Obama and the Treasury are left with the task of convincing foreign leaders and corporations that the US financial system is still safe despite high profile failures of several hedge funds, and the downfall of some of the US' largest banks and brokerages.

Forcing derivatives including CDOs, CDS, and a whole host of other products onto exchanges would be likley to minimize counterparty risk and might encourage the responsible use of the more levered instruments.

Citadel Group Losing Race to Clear CDS Trades

Citadel Investment Group and CME Group recently teamed up to help the Treasury and guarantee Credit-Default-Swaps, but have been unable to find any customers to clear the trades.

Meanwhile, Intercontinental Exchange (ICE), Goldman Sachs Group (GS), JP Morgan (JPM) and several other banks have also teamed up in the CDS market and were able to clear $7.5 billion in trades last week according to Intercontinental Exchange.

Currently, most trades in the CDS market are inter-bank.

The federal push for guarantees in the Credit Default Swap market comes amidst the failure of Lehman Brothers last year and the forced injection of $100s of billions to AIG.