***OT*** (not about LGND or LGND bop):
Another interesting story:
Bailout of Long-Term Capital Sets
Markets Reeling and Hands Wringing
An INTERACTIVE JOURNAL News Roundup
Call it one of the biggest acts of preservation in American financial
history.
Meeting Wednesday evening at the
headquarters of the New York
Federal Reserve Bank, 15 financial
institutions agreed to chip in $3.5
billion to keep alive the Long-Term Capital Management L.P. hedge fund.
"This is an extraordinary story" -- "staggering"
in its dimensions -- said Ron Chernow, author
of "The House of Morgan" and the current
bestseller "Titan" about John D. Rockefeller
Sr.
The magnitude of the bailout, and of
Long-Term Credit's woes, was so great that it
deflated much of market rally that began
Wednesday when Federal Reserve Chairman
Alan Greenspan signaled that central-bank
policy makers were poised to lower interest
rates -- perhaps as early as their upcoming
meeting on Tuesday.
"We have to bring the existing instabilities to a
level of stability reasonably shortly," Mr.
Greenspan told a Senate panel. "I think we
know where we have to go."
Stocks knew where they had to go -- straight up -- with the Dow Jones
Industrial Average soaring 257.21 points as investors bet interest rates
were headed down.
On Thursday, though, news of the Long-Term Credit bailout sent the
blue-chip index down 152.42 points.
The Fed and the financial institutions stepping in on the hedge fund's behalf
said they were acting to avoid triggering financial-market disaster. The plan
brought criticism and no small amount of hand wringing.
The bailout "underscores the hypocrisy of those who advocate the free
market," said Ken Guenther, executive vice president of the Independent
Bankers Association of America.
Others said that the Fed's involvement could backfire, creating a "moral
hazard" in financial markets that would cause investors to take ever greater
risks, secure in the knowledge that regulators would prevent a collapse.
Members of Congress called for greater scrutiny, and possibly more
regulation, of hedge funds. New York Fed President William McDonough,
urged banking regulators from around the world to pay more attention to
the risks of derivatives and other hybrid investments that are the funds'
bread and butter. |
