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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (24847)	10/4/1998 11:33:00 AM
From: Ian@SI	Read Replies (1) \| Respond to of 70976

GM, If the BB article you're referring to is: wallstreetcity.com Then, the data there is mostly meaningless to me. The derivatives business is just another line of business essential to international banking. In some respects, it's akin to selling insurance with the banks collecting a premium to mitigate a specific risk. They know that they'll have to pay up sometime, so they must set the premiums to allow for the risk being assumed. The table provides me with no meaningful data that I could use to determine whether or not the banks have taken on excessive risk. Hopefully, the banks know. Even so, Californians know that "the big one" could come anytime. I believe that was the fear that the Fed had. Given the current pessimism in the market, the LTCM collapse which otherwise might have been a mere ripple, could have triggered a disproportionate response. Thus the bail out. And by some banks that probably had a lot to lose if "insanity" prevailed. With the economy now being global, it could be looked at as a house of cards. While LTCM isn't a "card" in this analogy, collectively its counterparties probably would be a key foundational card. By rescuing LTCM, a small amount of incremental money was put at risk compared to the potential for a much larger amount of money that might have been required to rescue the banking system should "fear" have turned into "panic". My view of "reality" may be that of a pollyanna. However, the perception could have been far worse. And as we all have witnessed, perception becomes reality. <end schizophrenic ranting>