Hedge funds, especially those in trouble, are notoriously illiquid. From subprime mortgage funds like the two Bear Stearns funds that recently went belly up to blue-chip funds like Stephen Cohen's SAC Partners, which suffered significant losses last week, the huge variety of these unregulated greed holes share certain common characteristics: large fees, which can run as high as 50 percent of profits, plus service charges in the 3-7 percent range; the inability to trade one's stake in a timely fashion, as many hedge agreements require shareholders to keep their stake anywhere from three to 10 years; lack of transparency, i.e. information, in the relation of debt leverage to cash on hand; and, as in much of the subprime mortgage-based securities, the complete lack of any market for these instruments, at all.

These characteristics can also be found in the market for contemporary art. Christie's just raised its base commission to 25 percent, mimicking the huge percentages demanded by hedge managers. While contemporary art has benefited from huge piles of surplus cash recently, should falling markets continue, the ability to unload a wad of Hirsts or Warhols at a markup would diminish significantly, as the market for such things is extremely limited.

The unseen leverage factor in contemporary art lies in the way many galleries do business: using the rising value of inventory as the basis for bank credit to pay day-to-day expenses, top-of-the-line rents and expansions to hot new neighborhoods like Loisaida. As art prices rise, debt becomes easier to acquire, gallery wall space increases to showcase the hot art for day-tripping collectors who write more checks, increasing the base value of all present and future works by in-demand artists, whose inventory valuations allow galleries to gain more credit. Reduce surplus collector cash and these equations unravel quickly, the way the inability of middle-class home owners to pay their mortgages is unraveling hedge funds managed by Wall Street's most prestigious firms, who should know better, but never seem to.

The silver lining for contemporary art is its new international character, buttressed by those much maligned art fairs. Rubles, pesos, drachmas, euros: art dealers have been expert at finding new mines of cash for their wares. Still, there are signs that the subprime crisis is quickly spreading to German and British banks, and contemporary art has a major Achilles' heel: its complete lack of utilitarian value other than as a rather illiquid and nonuniversal means of exchange. Should demand for contemporary art drop even 10 percent, in light of larger fiscal concerns, that function will quickly disappear and the old adage that one should buy art solely for enjoyment rather than investment will quickly be put to the test. Those Jenny Savilles or Banks Violettes may seem less appetizing every morning in the dens of hedgers hemorrhaging cash to debt obligations.