Billionaire hedge fund manager Raj Rajaratnam has been arrested for using inside information to make trades on Google and other stocks, setting off speculation that Wall Street is in for a string of similar busts. Rajaratnam was released on a $100 million bail--the highest bail in U.S. history, according to The Business Insider. There are many questions yet to be answered, but financial analysts are homing in on a few key points: whether Rajaratnam's arrest spells trouble for hedge funds, if it signals new aggression from regulators, and whether it will ramp up the suprsingly muted reaction of Wall Street's return to profitability.

• This Will Undoubtedly 'Feed Suspicion' About Hedge Funds writes Reuters' Matthew Goldstein. He argues that the case will raise eyebrows "about the way hedge funds generate fat profits." But Goldstein cautions against reading too much into this one case: "[F]or anyone to assume that all hedge fund managers owe their success to getting information on the sly is unfair and wrong ... If the majority of hedge funds managers were so crafty, not so many funds would have gone bust last year." That said, there is one thing to worry about: the alleged involvement of an analyst at credit rating agency Moody's. This, writes Goldstein, "raises serious questions about safeguarding the flow of information from credit rating agencies to traders on Wall Street."

• This Will Help the SEC Hedge-fund managers aren't popular "on Main Street or in Congress," notes 24/7 Wall St's Douglas McIntyre. Successfully prosecuting Rajaratnam, he says, "will put the SEC back in the [public's] good graces."
  

• May Hurt Other Companies "Galleon Holdings," Peter Cohan points out at Daily Finance, "owns big positions in dozens of public companies." If Galleon is liquidated and the holdings are sold, that will affect those companies. Also, "if those companies have moles inside who fed information to Galleon, the companies will be embroiled in investigations."
  

• Will this Embarrass the White House? The Prowler at conservative publication The American Spectator has noticed that Rajaratnam is a big supporter of both the Tamil Tigers and the Democratic party, and has attempted to influence the latter on behalf of the former.
  

• New Developments in Insider Trading Cases: Wiretaps, Prominent Targets Jay of the Market Folly blog has two observations. Firstly, he writes, this case "is the first time wiretaps have been used to target insider trading." Secondly, this is a much bigger fish than insider trading cases tend to catch, and may lead to further investigations of insider trading among hedge funds.
  

• Hold Back the Mob The Wall Street Journal makes some of the same points as Jay, but adds that "[w]hen Wall Street and business are as politically unpopular as they are now, the media temptation is to chalk up every indictment to 'greed' and assume prosecutors are always right. In this case they may be right, but when political calls for scalps are in the air is precisely when the rest of us should reserve judgment until they prove it in court."

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Heather Horn