|
PureBytes Links
Trading Reference Links
|
I wish I knew the answer to your question, Bruce. My guess is that it
took someone of Greenspan's stature to get these guys to own up to
something which they already knew: the consequence of a $90B Fire Sale
far outweighed the consequence of coughing up a collective $3.5B.
They found themselves in the uncomfortable position of having to make a
choice between two negatives and, to make things even more
uncomfortable, they undoubtedly understood all they were *really* buying
was a bit more time...a bag of air (one of Tim's brown paper, no doubt)
with absolutely no guarantees.
Next time, it's going to take a whole lot more than Greenspan to get
them to come up to the "big, wood-paneled room with pictures of past
Federal Reserve presidents on the wall"...oh, Monica :-)
Dave
Bruce wrote:
> David, Michael, Tim,
>
> It's entirely possible there is significantly more bad news to come, we're
> all just speculating here (excuse the pun), but here's the question I would
> love an answer to. If the potential collapse of LTCM would have caused
> financial Armageddon that would've brought down even the large investment
> banks in question, why were they so hesistant to come to the aid of LTCM to
> begin with? Why did it take the involvement of Greenspan to get these guys
> to cough up the money?
>
> >From what I have read, Meriwhether first approached the head of Merril
> Lynch, who then contacted several other lenders in an attempt to arrange
> help. It was only after he was rebuffed that he called a meeting and asked
> for Greenspan's presence. This hints to me that the heads of the banks
> really didn't see any crisis coming from the collapse of LCTM. It was only
> prodding from the Fed that caused them to loan the money.
>
> Of course, this line of thinking raises the obvious question as to why would
> Greenspan see the problem as more serious than the private players involved.
> My best guess is that Greenspan is under significant pressure from
> politicians to provide some "leadership" in the world financial turmoil.
> I'm guessing he felt he had to orchestrate this intervention to show he's
> concerned and is actually doing something, even if it wasn't entirely
> necessary. Better safe than sorry, in his eyes.
>
> Bruce
>
|