U.S. banks have begun refusing to allow hedge funds to borrow against their subprime credit portfolios. According to the Financial Times, banks caught in the credit market debacle have cut off lending to funds that use credit portfolios — including mortgages, collateralized debt obligations and subprime securities — as collateral, leaving the highly leveraged funds heavily reliant on their prime brokers. Bank of America and Countrywide were cited by the funds, although there were believed to be others, the FT said. “My prime broker is my first source of borrowing, but I used to get additional financing from other sources. I called my usual banks last week to ask for their terms, and they told me there weren’t any terms because they weren’t lending against my credit portfolio any more. I’m not that happy. I need more than just one lender,” one hedge fund manager said. There was no evidence, the FT added, that prime brokers have eliminated lending to their clients. Bank of America declined to comment, and Countrywide did not return calls.

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