“Some hedge funds say they are concerned that banks that both sell the derivatives contracts and handle mortgage payments could be involved in a form of market manipulation.”

This is my favorite quote from the article. I’m still smiling an hour later at this. Hedge funds’ concerns about the banks manipulating the market is akin to a perpetually hungry fat guy being concerned that someone is going to get to the buffet before he does.

If the hedgies bet against subprime paper without investigating and understanding the provisions of pooling/servicing agreements allowing for modifications, then they justifiably may suffer the fate of all those who don’t pay attention to detail.