LTCM May Be Out Of Business, Fed Saysgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I found this interesting..
CHICAGO (Reuters) - LTCM, the huge U.S. investment fund that almost single-handedly threatened to bring down the world financial system last year, is about to fold, the U.S. central banker who oversaw its hurried rescue said Friday.
The near collapse of Long Term Capital Management LP, which specialized in highly risky investment bets, last year prompted its main creditor banks to come up with a $3.5 billion dollar salvage package. The deal was arranged by New York Federal Reserve President William McDonough amid fears that the firm's demise could devastate the entire global finance system.
``I'm happy to tell you that LTCM is very close to being out of business,'' McDonough told a top-level economic conference at the Chicago Federal Reserve Bank. ``I can assure you that is a result that pleases me considerably.''
LTCM had borrowed heavily from large investment firms to make bets on risky financial instruments that ultimately proved to be faulty. The repercussions were wide as fears grew in world markets that major investment houses could suffer huge losses if LTCM were not able to repay its debts.
That brought lending to private companies to a virtual halt for a few weeks. World markets recovered only after the U.S. Federal Reserve applied shock therapy in the form of three interest rate cuts in rapid-fire succession last fall to keep the financial system from seizing up completely.
McDonough said the fund, headed by former Wall Street maven John Meriwether and based in Greenwich, Connecticut, had repaid most of the bailout money. People close to the situation have said Meriwether already is talking to wealthy individuals and other firms seeking fresh cash to start a new fund.
``The firms that recapitalized it now have most of their money back,'' McDonough said.
``The remaining management of LTCM cannot do anything at all new until they have repaid 90 percent of the equity that was being put into them and I think that if they continue in business at all, it will be by another name -- and they may not be in business at all, never mind by another name,'' he added.
The hedge fund, started by star bond traders at Wall Street firm Salomon Brothers and including former Fed officials and academics, was estimated to have had about $100 billion in investments on a capital base of $5 billion.
Financial markets around the world dissolved in panic after the LTCM debacle, which erupted just after Russia devalued its currency and defaulted on large parts of its debt. The crisis topped off months of turmoil in Asia's former ``tiger economies,'' which had already sent shivers around the global economy.
The LTCM case has spurred efforts by U.S. bank regulators as well as international supervisory bodies to improve the oversight of such funds. But officials say tighter control is difficult since many of these investment vehicles have their legal home base outside of their main countries of operation.
-- y2k dave (email@example.com), October 03, 1999
The first of many!
-- David Lee Roth (Diver Down@Van Halen.ou812), October 03, 1999.
Boy I bet the boys at LCTM have seen a lot go over the dam. I'd image those guys have got a pr-et-ty interesting story or two...
-- a (firstname.lastname@example.org), October 03, 1999.
uh, and girls...
-- a (email@example.com), October 03, 1999.
What do you mean, "in cahoots with a criminal element"??? The Fed IS a criminal element!!! Counterfeiting, fraud, racketeering, loan sharking. Just about everything except drugs and prostitution, though I'll bet some of those LTCM guys could spill some beans about that too.
-- King of Spain (firstname.lastname@example.org), October 03, 1999.
Uhhhh, I think if you dig a little deeper you will be able to include drugs and prostitution on that list. Credit where credit is due, and discredit where discredit is due. Right?
-- Gordon (email@example.com), October 03, 1999.
The Feds didn't bail them out; they organized a private sector move to bail them out. I asked a close friend who is a partner at Goldman Sachs why they just wrote a check for $350 million. Answer: They would have lost more money in the ensuing bond market collapse. I asked what's to stop this from happening again. Answer: Absolutely nothing.
-- Dave (firstname.lastname@example.org), October 04, 1999.
"If I owe you a hundred dollars, I'm your debtor. If I owe you a hundred million, I'm your partner."
-- Mac (email@example.com), October 04, 1999.