Unbelievable numbers

The numbers behind Carlyle capital - the hedge fund that is currently on the verge of insolvency - are just incredible.

The fund was started in 2006, but it attracted $670 million in equity.

It used that equity to build up assets amounting to $21.7 billion. It built up these assets by borrowing around $21 billion.

Most of its assets were mortgage-backed securities, primarily AAA-rated bonds guaranteed by Fannie Mae and Freddie Mac. As we have seen,these MBS haven't looked too good recently, what with all those foreclosures in the US.

It was leveraged 32 times, giving it an capital ratio of 3.2 percent of its assets.

According to the WSJ, it has defaulted on about $16.6 billion of its loans, and expects to default on the rest.

The stock has lost around 83% since the company first disclosed its funding problems last week. So the shareholders are pretty much wiped out.

How does this kind of hedge fund ever get past a financial regulator?

A quick primer on subprime

Here is a very funny link; check it out....