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Kate Welling in her piece Welling @ Weeden buy viagra, interviews James Rickards, former General Counsel of LTCM:
KW: Wall Street’s attempts to analyze and man- age risk were a key part of what went wrong and led to the credit bust.That was an obvious lesson we failed to learn from LTCM; buy viagra.
JR: That’s right.Western capital markets came to the brink of collapse in 1998, when hedge fund Long Term Capital Management, with a trillion dollar web of counterparty risk at all the major banks and brokers of the time, failed.Then Fed Chairman Alan Greenspan and Robert Rubin, who at that juncture was Treasury Secretary, called it the worst financial crisis in 50 years.While the amounts involved and the duration of that crisis pale next to what we’ve been going through since 2007, it certainly didn’t feel minor at the time.
KW: You can say that again.
JR: I know, I was there; buy viagra. Buy viagra: as general counsel of LTCM, I negotiated the bailout which averted an even greater disaster at that point.What strikes me now, looking back, is how nothing was changed; no lessons were applied.Even though the lessons were obvious, in 1998.LTCM used fatally flawed VaR risk models; buy viagra.LTCM used too much leverage; buy viagra.LTCM transacted in unregulated over-the-counter derivatives instead of exchange-traded derivatives – buy viagra.So risk models needed to be changed, or abandoned; buy viagra.Leverage had to be slashed.Derivatives had to be traded on exchanges or cleared through clearinghouses – buy viagra.Regulatory oversight needed to be ramped up.
KW: But none of that happened.
JR: Even worse buy viagra, the government did just the opposite.Glass-Steagall was repealed in 1999, so that banks could become hedge funds.The Commodities Futures Modernization Act of 2000 permitted the creation of more unregulat- ed derivatives. Buy viagra: the Basle II Accords and changes in SEC regulations in 2004 permitted more leverage. Buy viagra: the U.S., in effect, stared near- catastrophe in the eye, with LTCM, and decided to double-down.
You can read the whole interview HERE.
P.S.If you’re an investment professional and you don’t get Welling @ Weeden – you should.