Word: feds
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...save the IMF, seem to be more global-minded than they give themselves credit for. But the tax-cut plan faces opposition from the last world leader with enough credibility left to kill it: Alan Greenspan, who single-handedly bullied Clinton into fiscal discipline six years ago. The Fed chairman is worried enough about inflation, now that he's cutting interest rates; he's not about to add more fuel to the fire. And very little U.S. economic policy gets made without Alan Greenspan's endorsement...
...manages some $500 million in assets, observes that "given all the losses that U.S. banks suffered in the late 1980s and early 1990s, you would think they would remember what went wrong." Concurs Ken Guenther, executive vice president of the Independent Bankers Association of America: "Why wasn't the Fed blowing the whistle on these totally inappropriate, crapshoot investments by some of the biggest banks in the country...
...John Meriwether, who helped make Salomon Brothers the top bond 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...
Last week's rescue was particularly embarrassing for Fed Chairman Alan Greenspan, who just two weeks ago assured Congress that hedge funds "are strongly regulated by those who lend the money. They are not technically regulated in the sense that banks are, but they are under fairly significant degrees of surveillance." On the other hand, Treasury Secretary Robert Rubin, a former co-chairman of Goldman Sachs, had put out a word of caution, saying that "people who extend credit tend to get a little less careful" in good times...
...Wall Street insiders say what really spooked the Fed was indications that Long Term Capital had off-balance sheet derivative contracts with a value of more than $1 trillion. Derivatives are financial instruments that bet on the future direction of interest rates, stock indexes or currencies. Defaults representing less than 1% of that whopping sum could have sunk the fund and punished banks and investment firms around the world...