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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (946)	6/13/1999 1:24:00 PM
From: Thomas M.	Read Replies (1) \| Respond to of 2794

biz.yahoo.com LCTM pays back $150 mln loan to Italy UIC ROME, June 13 (Reuters) - The Italian Exchange Office (UIC), an agency of the Bank of Italy, said on Sunday it had accepted a request by U.S. hedge fund LTCM to pay back nearly a $150 million loan made by the UIC in 1996. "On June 7, Long Term Capital Management (LCTM) asked the Italian Exchange Office if it could pay back in advance the $150 million loan underwritten by the UIC in 1996, in accordance with an option in the original agreement, the UIC said in a statement. "The UIC accepted the request collecting the whole amount underwritten by $150 million," it said. "From October 1996 to June 7, 1999, interest returns regularly drawn by the UIC amounted to around $26 million, equivalent to an average annual return...of 6.6 percent," the statement added. When the LTCM ran into trouble last year, eyebrows were raised when it emerged public money had been put in such a fund, set up with the sole purpose of making speculative bets on the market. There was further surprise when UIC Director Pierantonio Ciampicali acknowledged last October that the agency had not realised that LCTM was a hedge fund when it placed the investment. The UIC had a $250 million exposure to the LCTM hedge fund, made up of a $100 million investment placed in 1994 and the 1996 loan. Bank of Italy Governor Antonio Fazio, addressing parliamentary budget committees, said in October Italy had realised then $122.9 million on its original $100 million investment paid from reserves. Tom

To: Henry Volquardsen who wrote (946)	7/20/1999 10:18:00 PM
From: C.K. Houston	Read Replies (1) \| Respond to of 2794

Henry, I have followed this thread for some time, and I have always admired your knowledge, willingness to share ... and would appreciate your opinion as to what's going on in Japan. Back in April you made this comment: <I have to give a disclaimer first. I have equity stakes in large cap banks and insurers. I also have an equity interest in a non public internet broker that is considering going public. So I have a personal interest in both sectors staying strong.> Have you feelings changed in light of whats occuring with the Japanese FSA (Financial Services Administration) investigation into Credit Swiss First Boston. <A little known clause in the banking act states that the holder of the license will not engage in subversion, riots or otherwise treasonous attempts to disrupt the Japanese government. The interpretation of derivative trades that "postpone losses" (son saki oukuri sohen) was determined as a subversive act against the integrity of the Japanese financial system in a manner that resulted in a distortion of the events. The Ministry of Finance (MOF), to which the FSA belongs, does not have authority over industrial corporations. They do have legal authority over the banking and securities system. Industrial clients of CSFB who may have used derivatives for clever accounting schemes in Japan, are not the target of the FSA. What has just emerged in Japan is that the bank is liable for something that a Japanese client might have done. However, the interpretation may actually refer to the counter-party deals involving Long Term Credit Bank and Nippon Credit Bank that required the government bailout. In this sense, by being the counter-party to a bank that was engaged in derivative losses which in turn were not marked to the market, a western bank appears to have engaged in a treasonous act against the Japanese government. pei-intl.com ======================================================== Here's some other discussion on the above: Message 10586106 RE-PRINT OF POST FOLLOWS ... "Not to pour more gasoline on the fire, but I read this and almost panicked on the spot (I haven't seen you all mention it yet): pei-intl.com Posted MB, and here was his response: Message 10580226 I also talked to several good friends who are derivatives traders, and this issue is VERY, VERY real. No real mainstream press coverage for obvious reasons, but you will see lots of Western financial institutions quietly flee Japan if CSFB gets whacked. Just another land mine out there." ================================================== What's your opinion on the above? Thanks, Cheryl