U.S. banks (including the U.S. divisions of the biggest London, Tokyo, Paris and Frankfurt banks) had (as of April 11) at least $1.240 trillion in credit outstanding to hedge funds, and perhaps as much as $2.367 trillion when speculative funds which take deposits, such as money market mutual funds, are added in. This is according to the Federal Reserve’s weekly published Form H8 for that date.
Hedge funds as a whole had, at that point, more than $1.1 trillion bet on the Treasury market ‘basis trade” which has been draining liquidity from the $30 trillion Treasury market and threatening a financial breakdown there. Nearly all of that $1.1 trillion will have been borrowed from banks, as that is how the basis trade operates; even a large hedge fund would either bet all its investors’ money, or make insignificant gains, if it did not greatly leverage its bets by bank borrowing.
