GREENSPAN DEFENDS SAVING OF HEDGE FUND.Byline: Rob Wells and Katherine Reynolds Bloomberg News Federal Reserve Chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. said Long-Term Capital Management Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert C. LP's banks and other creditors played a significant role in its near collapse by lending money without understanding the extent of the risks they faced. The institutions ``misjudged the state of potential losses that could occur under extreme circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or ,'' Greenspan said Thursday at a House Banking Committee hearing into the $3.6 billion takeover of Long-Term Capital. Greenspan also defended the Fed's role in brokering last week's takeover by arguing that bankers are best situated to understand the risks of lending to 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" . He urged the panel not to pass new regulations. ``I know of no set of supervisory actions we can take that will prevent them from making dumb DEAF, DUMB, AND BLIND. A man born deaf, dumb, and blind, is considered an idiot. (q.v.) 1 Bl. Com. 304; F. N. B. 233; 2 Bouv. Inst. n. 2111. DUMB. One who cannot speak; a person who is mute. See Deaf and dumb, Deaf, dumb, and blind; Mute, standing mute. mistakes,'' Greenspan said. The Fed's New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of branch helped organize 14 banks and brokerage firms to take over the Greenwich, Conn.-based hedge fund, which suffered as much as $4 billion in losses in highly leveraged bond and stock trades. The central bank's aim was to avoid ``possible serious market dislocations'' that ``could have potentially impaired the economies of many nations, including our own,'' and didn't signal a new policy to protect fund investors, Greenspan said. He said the New York Fed's actions were meant to be a catalyst for a ``an orderly private-sector adjustment, not to dictate the path that adjustment would take.'' The Fed didn't put funds at risk and didn't make promises in the rescue, ``and no individual firms were pressured to participate,'' he added. New York Fed President William McDonough
William A. McDonough (b. 1951, Tokyo, Japan) is an American architect and founding principal of William McDonough + Partners, whose career is focused on , who also testified at the hearing, said a failure of the fund could have created volatility in world markets, triggering ``a vicious cycle'' of investors fleeing to safer investments and capital drying up. CAPTION(S): photo PHOTO (color) Federal Reserve Chairman Alan Greenspan listens at a House Banking Committee hearing into the Long-Term Capital takeover. Joe Marquette/Associated Press |
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