Repurchase deals, of course, have added lots of liquidity to the system over the years. They've become an indispensable source of cash for many market participants. But the problems at various hedge funds have really tightened the market. Financial News Online notes there are very few securities that banks will want to finance via repo deals. That includes some investment grade securities, as well as the more toxic stuff. For the real garbage, there is no lending at all. This all points to the view that more hedge funds will fail, especially those that gorged on certain securities. The bigger issue is whether the market will force another top investment bank (Lehman Brothers perhaps?) into a bailout.

For more:
- here's the article from Financial News Online

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