AG didn't bail out LTCM, the banks did
Not only is it my contention that AG bailed out LTCM, but maybe he bailed out Lehman Brothers and BT, too (to me it's no coincidence that Deutsche Bank made their bid when they did), and maybe even some other bank that was suffocating but not yet under a swirl of negative rumors that memorable week in October 1998. My suspicions are based solely (and weakly) on the timing of the surprise rate hike, which I often picture as an emergency room 'cardiac defibrillation' of the markets, which was on a death bed. The rate hike came about an hour before the close, the day before expiration. A sickly bank like BT, too embarrassed to approach the discount window hand-extended, may have been tipped off by AG's cronies about the hike. With low volotilities on the index options just a day before expiration, just a few thousand calls on the S&P 100 would be all that is necessary for BT to net enough to live another day. I have mentioned this conspiracy theory before and I always get my head bitten off, but as a gentleman who witnessed several winning positions metamorphosize into losing ones in a span of 10 minutes that fateful day, I feel that the above string of coincidences must warrant more than a raising of the eyebrows. Still, we may never know what REALLY happened! |
