Regulators need help from hedge funds to make sure a bankfailure in the future doesn't roil markets the way Lehman BrothersHoldings Inc. did. The problem is that hedge funds don't see what'sin it for them.

The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), andBank of England have met with representatives for firms such asCitadel LLC, D.E. Shaw & Co., BlackRock Inc., and PacificInvestment Management Co. (Pimco), to try to persuade them to waitbefore canceling contracts with a collapsing lender, said threepeople with knowledge of the matter.

The purpose is to give regulators more time to resurrect afailed bank so derivative trades and lending arrangements thatunderpin the global financial system don't have to beterminated.

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