To Big To Fail ...... And Save

There is an interesting article in the Telegraph UK about how thousands of hedge funds are on the brink of failure as the global crisis unfolds. Emmanuel Roman, chief executive of GLG Partners, and Nouriel Roubini, New York University Professor and long-time predictor of financial doom, have made the recent forecast for the industry. Of interest in the article, beyond the prediction of massive hedge fund failures, is the following quote:

"It's like we're walking blind in a minefield," said Prof Roubini. " Every situation has become risky and no one can trust each other. The banks are too big to be allowed to fail, but they're also too big to be saved."

Unfortunately, the "too big to fail, but too big to save" perspective may be more true than we want to believe or admit. The trust issue is certainly being played out from all directions. Of additional interest is the belief that recent events and a protracted recession will end the financial dominance of the US. While I believe the end of this story is still yet to be written, you have to wonder, "What if this is true?". Who will step into the leadership role of the US? Economies that are still developing and emerging? Economies that reply on crude oil revenues? The European Union? Furthermore, are any of these economies really decoupled? Rocked back on its heels? Definitely. Loss of leadership? Not so sure.