I've just skimmed the previous posts, but I don't think anyone has touched on Hedge Funds and why they were worried about them so i'll just tack on a little about what I know of them as I had to research a hedge fund for a class.
Basically they are like mutual funds for the really rich, a bunch of people with oodles of money invest in a hedge fund (you need to be an accredited investor meaning you need a networth of $1 million dollars or an annual salary of 200k for last few years) which then has super oodles of money to invest in all sorts of things, not to mention shorting stocks
. But the hedge funds themselves aren't really regulated by governments, and since most are private companies they don't really share their investment information to others.
The danger here is that alot of them rely on total guess work for their investing, and many have lost millions of dollars, the most recent high profile case being the Amaranth case where Calgary trader Brian Hunter bet on natural gas and lost big time.
What governments are worried about is that one day some of these hedge funds will make a bad investment and many people will lose alot of money. You might think that isn't so bad seeing as these people are all millionaires and billionaires, but many pension funds and university/college endowment funds are investing in hedges so if one goes down many pensioners and universitys may be the most affected.