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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (16919)	11/1/1998 3:48:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 18056

Haim, every time you do an "acquisition" you get access to the real books before you put your money in. Since LTCM was not (and still is not) a publicly traded company, their not even a possibility of trading on such "inside information". I would be surprised if 14 institutions would have been asked to put up $3.5 billions without a detailed look at the books. What would have happened if the New York Fed's did not organize the LTCM rescue? Forced liquidation of more than $100 billions of positions in illiquid markets? The guilty parties are the lending banks that did not look at those books better before to determine the extent of leverage used in LTCM's position, and thus those guilty parties need to assume now the risks (and assume 90% of LTCM assets, both sides of the hedges, meaning, they are still on the hook for possibly more than the $3.5 billion they injected). The FED intervention in lowering the rates was well within "expectations" (you say yourself that the market would have accepted a single .5% rather then the two .25%) and the timing helped counteract some instabilities, which the Fed's must have felt could develop into a panic. I do not know what would have happened if they cut the rate at once by .5% or if the second cut had occurred after markets closed, but it seems, that their action brought some confidence back. Zeev