Derivatives: Darth Vader's Revenge Message Board

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Non-Tech : Derivatives: Darth Vader's Revenge

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To: Worswick who wrote (142)	9/24/1998 12:11:00 AM
From: James C. Mc Gowan	Read Replies (3) of 2794

Worswick and Thread: I just watched a CNN-Moneyline report on the Long Term Capital Mgmt, a Greenwich, CN hedge fund. The reporters indicated that the Federal Reserve Bank President for the New York region "encouraged" many prominent Wall Street brokerages/financial institutions to support a bail-out, something on the order of $4M, to keep this fund afloat. Further, that 17 big firms have exposure to this fund, which has leveraged derivatives at 40 to 50x. The amount of exposure was indicated to be on the order of $400 MILLION DOLLARS, and failure would put all of these firms involvement at risk. I have read(and tried, with my limited education in these matters) to understand the significance of the postings regarding derivatives on this thread. Could you explain the import of this situation, in that it seems most significant the a Federal Reserve President would intervene in behalf of a hedge fund, which I would think, would normally be allowed to fail. Thanks for this informative thread. vocex P.S: please excuse any misunderstandings or misreporting of facts; I'm typing this from memory and did not hear the entire report.

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