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Strategies & Market Trends : Asia Forum

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To: Ramsey Su who wrote (6750)	9/26/1998 12:50:00 PM
From: Sam	Read Replies (1) of 9980

Ramsey, "LTCM's positions" are not LCTM's anymore. They are the banks, the institutions that provided the liquidity. That is what is missing here. I don't know if the principals of LCTM went to the Fed or not; it is possible that the banks or someone connected to the banks went to them. Given their leverage, if they failed, they could have started a chain reaction of failures. Go to Clark's "Derivative: Darth Vader's Revenge" thread. Read it. He has been warning about this since its inception (in fact, I think he started warning about the possible chain reaction on this thread before he opened that one). What is scary is the possibility that other hedge funds abused leverage in the same way. Obviously, there is a limit to how many leaks of this magnitude can be patched. Hedge funds must be regulated in some way, but their offshore nature--not to mention the very complexity of derivatives--makes it almost impossible. There will always be a "government" somewhere willing to allow such things. As always, corrupt governments are the fly in the institutional ointment.

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