What was the first warning shot fired in the financial crisis?
The first warning shot in the financial crisis of 2008 happened actually in the late 1990's and while there was an initial reaction to the event, little if anything really changed on Wall Street. What was that precipitous event? It was the failure of the Hedge Fund, Long Term Capital Management (LTCM) which lead to a massive bailout by other major banks and investment houses.
LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Board of directors members included Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics. The company had developed complex mathematical models it used to make investment decisions. Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became a prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.
But do you think Congress or Wall Street learned anything back then? Nope! That was when Congress was controlled by the Republican Party and occurred during the post Lewinsky investigation, by then rabid Special Prosecutor Ken Starr. So to say the impeachment attempt by the Republican led Congress was a distraction to events surrounding Long Term Capital Management, is an understatement. It was a casualty from a divided country where Congress was consumed over a sexual matter, where a President who was embarrassed by it, lied about it to the Public. I don't blame just Republicans, I also blame the Democrats and the American people including me, who did not press our elected officials to investigate this matter more fully at the time and even years later.
The cost to our Nation is just starting to be understood. Think what might have been prevented in the current Financial crisis had Congress and Wall Street done a complete investigation as to what caused the financial meltdown of Long Term Capital Management. We have only recently come to understand the interconnection to many of the worlds problems.
LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Board of directors members included Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics. The company had developed complex mathematical models it used to make investment decisions. Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became a prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.
But do you think Congress or Wall Street learned anything back then? Nope! That was when Congress was controlled by the Republican Party and occurred during the post Lewinsky investigation, by then rabid Special Prosecutor Ken Starr. So to say the impeachment attempt by the Republican led Congress was a distraction to events surrounding Long Term Capital Management, is an understatement. It was a casualty from a divided country where Congress was consumed over a sexual matter, where a President who was embarrassed by it, lied about it to the Public. I don't blame just Republicans, I also blame the Democrats and the American people including me, who did not press our elected officials to investigate this matter more fully at the time and even years later.
The cost to our Nation is just starting to be understood. Think what might have been prevented in the current Financial crisis had Congress and Wall Street done a complete investigation as to what caused the financial meltdown of Long Term Capital Management. We have only recently come to understand the interconnection to many of the worlds problems.
Labels: Congress, cost to our Nation, financial crisis, Ken Starr, Long Term Capital Management, President, Republican party, Special Prosecutor, warning shot
posted by Charles Amico at 7:59 AM
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