The Crackdown on Stock-Loan Schemes

A criminal probe by the feds may reveal some of the mysteries of short sellers

It may not have the cachet of mergers and acquisitions or leveraged buyouts, but the little-known business of securities lending is one of Wall Street's most lucrative. Investment banks rake in roughly $10 billion a year on the fees they collect for lending stocks and bonds to so-called short sellers—intensely secretive hedge funds and other professional traders who bet on falling prices.

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