William, i have never figured out exactly what machinations, if any, go on before options expirations (although i do know of the hypothesis that options and equities market makers conspire to rig share prices so that the maximum number of options outstanding expire worthless.) However, the article not withstanding, i really don't think that the Chairman was trying to bail out the directors of L-T Cap. Mgmt. I don't think he has any love for any of those people, or for equities investors in general. I think the reason for bailing out the fund was to save the banks that had loaned LTCM a lot of money as the fund wracked up losses. Remember that this occurred on renewed worries about Asia with a lot of attendant market volatility (and remember also that one of the goals of the Fed is to maintain the stability of financial markets - although not necessarily the level of asset prices, as i discussed with Michael the other day). If LTCM's fall would have precipitated the fall of the banks with big positions in the fund, the repercussions of that could have been very major and very dire. Financial markets in the end are very fragile creatures, aren't they! The Fed would have been (and rightly) criticized for not acting on this when they knew there were problems. So they did act. In fact, although i would like to see the fund managers roast in an impoverished hell, i applaud Greenspan for what i perceive as a timely intervention.
jess. |
