Comptroller of Currency sees no danger in hedge funds.Is the burgeoning use of hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" threatening the stability of the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of banking system? U.S. Comptroller of the Currency Comptroller of the Currency A government official, appointed by the President of the United States, who keeps control over all national banks, and receives reports from the banks at least quarterly, to be published in newspapers. Eugene A. Ludwig says no. In testimony before the House of Representatives Committee on Banking, Finance and Urban Affairs, Ludwig said that at the beginning of the second quarter of 1994, the aggregate credit exposure of the eight national banking companies with such exposure was 1.04 billion. That represented an average exposure of only 0.2% of each bank's assets, or 0.5% of the assets in the U.S. banking system. Although the hedges did not appear to pose a risk to the banking system, Ludwig told the committee he was paying increased attention to bank credit exposure to hedge funds. He reported his office had full-time staff on location at the eight banks with hedge exposure to track such risk. In testimony elsewhere, Ludwig expressed concern over banks' making proprietary investments in derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. and other hedging instruments to increase their own revenues. "I don't see any danger from hedging activities at the nation's banks," said William C. Leiter, senior vice-president of Bank One in Columbus, Ohio Columbus is the capital and the largest city of the American state of Ohio. Named for explorer Christopher Columbus, the city was founded in 1812 at the confluence of the Scioto and Olentangy rivers, and assumed the functions of state capital in 1816. . "The only danger I see would be a lack of access to hedging activities due to legislation regulating a financial area that is poorly understood by federal legislators." |
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