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The hedge fund leverage risk is an interesting problem that Congress
considered wrestling with shortly after the LTCM debacle. The Conventional
Wisdom spouted by everyone including Greenspan was that you can't regulate
hedge funds because they will just move "offshore". I agree with this but
aren't there 2 sides to every deal?
Why can't we regulate how much our money center banks are allowed to
lend/lever any given client? Why can't we say that banks are not allowed to
lend more than 10:1 or 15:1 leverage to any particular entitty? Sure, there
are complications like how does a bank know how much is being lent to a
party by other banks. But couldn't this be solved by some reporting
requirement?
Kent
----- Original Message -----
From: "Earl Adamy" <eadamy@xxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, August 17, 2001 8:57 PM
Subject: Re: [RT] Derivatives
<snip>
these institutions will be taken down by derivative risk, the reserving of a
paltry $2 million against $43 trillion of derivative in a less predictable
economy is absurd. If the COC did not have some concerns in this regard, the
report would not have appeared as written.
Earl
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