Derivatives: Darth Vader's Revenge Message Board

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Non-Tech : Derivatives: Darth Vader's Revenge

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To: Sam who wrote (420)	10/6/1998 3:12:00 PM
From: Henry Volquardsen	Read Replies (1) of 2794

Sam, There really are no Bahamian or Panamanian financial institutions that can offer the amount of leverage that is needed. Nor do any of them trade the products needed. And it is not an issue of large money center banks opening up there to service them, they can't. They would have to set up branches which ultimately fall back under the control of the home country authorities. And the institutions can't uproot themselves like the funds and relocate, they need direct access to large domestic markets to maintain their size. So like I said the funds can escape regulation but the banks can't. And hedge funds can't survive without big banks. So if done properly the banks can be used to control the hedge funds. In fact the banks did a pretty good job of controlling the funds for years and for the most part still do. LTCM was in many ways an exception to the rule as the bankers really bought into this snow job and were competing with each other with ever easier credit. And as much as I believe in free markets, given their failure in this regard I can't argue against imposing capital constraints on the banks regarding such activity. Henry

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