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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Yogi - Paul who wrote (4929)	11/7/1998 4:54:00 PM
From: LK2	Read Replies (1) \| Respond to of 9256

Yogi, a foreign god makes a brief appearance on Wall Street. Or is it the same old BS that covers over past mistakes? (How long does humility last at a bank or brokerage, anyway?) For Personal Use Only >>>>>>>>>>>>>>>>>> biz.yahoo.com Friday November 6, 6:11 pm Eastern Time Hedge fund debacle teaches brokers humility lesson By Jack Reerink BOCA RATON, Fla., Nov 6 (Reuters) - Smart money isn't always that smart, said brokerage executives sobered by the near-collapse of hedge fund Long-Term Capital Management. Wall Street executives, gathered in Boca Raton, Fla., for a three-day industry conference, on Friday said the big investment fund's troubles amounted to a lesson well-learned and have led them to scrutinize the trading of even their pet customers to prevent similar mishaps in the future. ''Everybody in the business, whether they were banks or securities firms, forgot about the 'know your customer' (rule),'' said Sanford ''Sandy'' Weill, the co-chief executive of Citigroup Inc. (NYSE:CCI - news), at the Securities Industry Association's annual meeting. ''All everybody was looking at was the collateral, not who stood behind the collateral.'' The securities industry got a lesson in humility when Long-Term -- an unregulated investment fund for wealthy investors run by one of Wall Street's fabled bond traders, John Meriwether -- lost close to $4 billion on ill-timed global bond bets over the summer. Some of the brokerage industry's biggest names, including Merrill Lynch and Co. Inc.'s (NYSE:MER - news) chairman David Komansky, had invested in Long-Term. The fund, which had used borrowed money to leverage its trading positions to total $200 billion, faced bankruptcy and posed a serious risk to its lenders' financial health. A group of 14 banks and brokerages shelled out $3.6 billion to prevent the fund, one of the largest and most respected in the business, from going under -- preventing a likely bond market collapse and saving their own skins in the process. The experience has sobered many executives and caused firms to scrutinize the trading positions of leveraged funds like Long-Term, which is based in Greenwich, Conn., and had Nobel laureates Myron Scholes and Robert Merton on its payroll. ''Even the biggest -- perceived to be the smartest -- can be too smart for their own good,'' said Mark Sutton, the president of PaineWebber Group Inc.'s (NYSE:PWJ - news) private client business, in a brief interview on Thursday. ''People now realize how fragile (the business) can be and how important it is that we manage risk.'' Long-Term's near-bankruptcy also drew in U.S. regulators -- starting with the New York Federal Reserve Bank, which orchestrated the fund's bailout, and ending with the Fed's chairman himself, Alan Greenspan, telling Congress that regulators should not meddle in the largely unregulated industry. But the chairman of the U.S. Securities and Exchange Commission, Arthur Levitt, told reporters Friday that he would meet with overseas regulators in London next week to discuss setting global disclosure standards for hedge fund lenders, such as banks and brokerages. ''To be effective, the kind of disclosure and the kind of transparency we are talking about should be globalized,'' Levitt said. Citigroup's Weill told reporters earlier that securities firms failed to gauge the magnitude of the fund's positions, scrutinizing only their own exposure. Meriwether refused to outline his trading strategy and overall positions, and Wall Street firms turned a blind eye -- something that is unlikely to happen again, Weill said. <<<<<<<<<<<<<<<<<<