HowardBad Mortgages; Worse Hedge Funds
A Greek Picasso in Midtown Manhattan?
The fear of financial collapse has not gone away, it has, with reason intensified. See the Establishment writhe in a mass of hopes and fears. In the lonesome latter years:
[source: NYTimes, Jenny Anderson, Feb. 9] {NEW YORK TIMES} BUSINESS FRONT-PAGE ARTICLE ON "CALM BEFORE AND DURING A STORM; DERIVATIVES MAY PUT THE NEW YORK FED CHIEF THROUGH A STRESS TEST." A priority of New York Fed President
Timothy Geithner, is "understanding and monitoring the $26 trillion credit derivatives market--twice the size of the United States economy--the fastest-growing financial market there is." When this market gets tested, through volatility, increasing debt costs and rising defaults, "no one knows for certain how it may react."
Geithner points out, in an interview with the {New York Times}, "We've seen substantial change in the financial system, with the emergence of a very large universe of leveraged private funds, rapid growth in exposures to more complicated and less liquid financial instruments, all during a period of very low volatility." "This means we know less about market dynamics in conditions of stress."
"The fact that the banks are stronger and risk is spread more broadly should make the system more stable," Geithner said. "We can't know that with certainty though. We'll have a test of that when things next threaten to fall apart."
When the shock hits, the {Times} says, the reaction will be far more complex than when LTCM collapsed in 1998. Then, the New York Fed had to make calls to 14 Wall Street banks; but today, the number of institutions would be vastly higher. So, maybe that is why some of even the type British financial people don't want the Iran war, at least yet.
