New York Fed Warns of a Hedge Fund Crisis like LTCM -- U.S. Financial Press Lies!

3 de may de 2007

<body><div id="article"><tr><td height="28" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>New York Fed Warns of a Hedge Fund Crisis like LTCM-- U.S. Financial Press Lies!</h1><p><div class="right_image"><img height="256" src="/files/pictures/f1cf4fced6e54b12dbe226b10c67f105/original.jpg" width="266" /></div></p><p>May 3, 2007 (EIRNS)--The New York Federal Reserve Bank released a report about hedge funds on May 2, which warns sharply against "concentrations of risk" matching the situation in 1998 before the big <b>LTCM hedge fund</b> blew up, nearly taking down the international monetary system with it.</p><p>That LTCM crisis, led to President Bill Clinton proposing an international conference to create a "new financial architecture," but no real steps were taken.</p><p>Now, says the New York Fed's report, "Recent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998."</p><p>The "correlations" reference, in plainer English, means that the great majority of hedge funds are making the same bets, investing in the same futures, buying the same kinds of debt, etc., so that a sudden eruption of financial losses would strike them all internationally, as in the Russian bond-default crisis which struck down LTCM and many others in October 1998.</p><p>Moreover, the hedge funds are making these investments with tremendous proportions of borrowed funds.</p><p>"Similar trading strategies" and leveraged debt "heighten risk when funds have to close out comparable positions in response to a common shock," warns the New York Fed report, written by its capital markets economist Tobias Adrian.<div class="left_image"></div></p><h6> <i>The Tower of Babel</i> by Pieter Brughel the Elder</h6></div></body>