Word: bailouts
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...PAULO, Brazil: The presidential election is over, and the first-ballot reelection of the IMF's preferred candidate, Fernando Henrique Cardoso, looks sewn up. So where's his reward -- the $30 billion bailout? For one thing, the IMF and the U.S., along with the rest of the G-7 nations, are still working on it. For another, it's supposed to be a secret...
...Washington doesn't want to publicize it yet, because there are still runoff gubernatorial elections in which Cardoso needs support," says TIME business reporter Bernard Baumohl. "The news that austerity measures are coming along with the bailout might cost him politically with constituents." But Cardoso is pressed for time. His best chance to get those painful budget cuts through Brazil's Congress is to move fast, while he's dealing with an outgoing group that's less likely to worry about short-term political fallout. That's a presidential problem Bill Clinton would love to have right now -- his Congress...
Last week's bailout raised twin fears in Washington and on Wall Street as tall as Manhattan's Twin Towers. The first: that Long Term Capital's financial troubles are shared by many of the country's 4,000 hedge funds--lightly regulated and often secretive, high-risk vehicles for sophisticated investors. The banks and brokerages that have loaned them money could be carrying big and undisclosed potential liabilities. If those lenders get caught in a cash squeeze, they could respond by cutting back on lending, even to low-risk borrowers...
...second fear is that the Long Term Capital bailout could encourage banks to make still more risky loans, confident that the government won't let them get into trouble. In this regard, the rescue was rich in irony: it came as the Senate passed a bill that would make it harder for ordinary citizens to seek bankruptcy-court protection from banks and other creditors...
...house of the 1980s, as recounted in the best seller Liar's Poker by Michael Lewis. The partners, who worked out of waterfront offices in tony Greenwich, Conn., included Nobel-prizewinning economists Myron Scholes and Robert Merton and former Fed Vice Chairman David Mullins. As their price for the bailout, the creditors acquired a 90% stake in the fund, which effectively removed Meriwether and his partners from power. But huge management fees that the partners have collected could still leave some ahead of the game by tens of millions of dollars...