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How Carry Is the Velvet Glove of Power 

Every sophisticate into the pool?

Posted in 2007-08 Financial Crisis, Money, US politics Tagged with: , , , , , , , , ,

The first time I heard the term “carry trade” was in June 2007. I was standing by an elevator bank as bond trader Dan Fuss explained to a cluster of anxious money managers the essence of Bear Stearns’ bailout of a pair of its hedge funds announced earlier that day. It had been a carry trade, Fuss told them, harder to understand than a classic currency carry because it involved mortgage market derivatives, but otherwise no different in its fundamental structure:  borrow at low rates in one market in order to invest in high-yielding assets in another, and hope that