US faces investigation of financial system by IMF

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Number of messages in the thread: 2

1. Date: 2008-06-27 12:15:01
Subject: US faces investigation of financial system by IMF
From: "Mark L." <m...@s...hn> Search message by this author

interesting reading at
http://www.spiegel.de/international/world/0,1518,562
291,00.html

As part of the assessment, the Fed, the Securities and Exchange Commission (SEC), the

major investment banks, mortgage banks and hedge funds will be asked to hand over
confidential documents to the IMF team. They will be required to answer the questions

they are asked during interviews. Their databases will be subjected to so-called
stress tests -- worst-case scenarios designed to simulate the broader effects of
failures of other major financial institutions or a continuing decline of the dollar.

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2. Date: 2008-07-02 09:05:19
Subject: Re: US faces investigation of financial system by IMF
From: dapperdobbs <G...@h...com> Search message by this author

On Jun 27, 8:15 am, "Mark L." <m...@s...hn> wrote:
> interesting reading athttp://www.spiegel.de/international/world/0,1518,5
62291,00.html
>
> As part of the assessment, the Fed, the Securities and Exchange Commission (SEC),
the
> major investment banks, mortgage banks and hedge funds will be asked to hand over
> confidential documents to the IMF team. They will be required to answer the
questions
> they are asked during interviews. Their databases will be subjected to so-called
> stress tests -- worst-case scenarios designed to simulate the broader effects of
> failures of other major financial institutions or a continuing decline of the
dollar.
>
Thought it might be worth mentioning that IMO there has been about a
three month time-lag between actual events and actual news in this
whole hedge-fund-product / bank-buyer fiasco. The guys from MIT who
managed the positions (the leveraged portfolios of CDO's, ABS's or
whatever you prefer to call them) knew by the second quarter of 2007
that a bath was imminent, and that it was "too big to hide." By the
3rd quarter, news had begun to leak out, and banks' upper management
(who probably still do not know or do not understand the positions)
were assuring through the media that they knew all about everything
and were in control (even standing to benefit from market
disruption).

A month or so later, banks could no longer hide and the first round of
write-offs appeared. By the 4th quarter, the scandal had affected
mutual fund managers' portfolios, and was all over the news. By the
1st quarter of 2008, the ramifications of the massively leveraged
portfolios and failed schemes almost fused the municipal bond market.

Probably starting in the 3rd or 4th quarters of 2007 the regulatory
bodies outside the Federal Reserve had already begun trying to unravel
the secrecy the position or portfolio managers had already, probably,
for the most part, tried to calmly walk away from. To their credit,
the managers probably did a very good job at the less than
exhilarating task of taking losses and working down positions. By the
1st quarter of 2008 the regulators were mapping out procedure based on
accumulated facts and evidence. Now at the end of the 2nd quarter,
they are breaking the news.

The problem the regulators faced, in my speculation, is that the
leverage schemes dreamt up by the MIT eggheads had proliferated across
borders. Many banks over the world were greedy and stupid. Many of
those active in Long Term Capital Management, the hedge fund that blew
up in 1998(?), just walked away into new jobs, doing the same thing,
for different financial firms. UBS had lost in the LTCM deals, and
recently it was one of the biggest losers in this most recent melt-
down. Regulators could not, in my speculation, rely on traditional
national legislation to curtail the gambling. It had to be a
coordinated international effort.

The article referenced in the post above is just one news story that
has been released. Hopefully, the international guys have it worked
out right this time, and will shut down this massive speculation and,
some have held, outright theft.

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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.