On 9/20/07, Charles Brown <[EMAIL PROTECTED]> wrote: > Lets say the banks didn't do what they did. To whom would all that > money have been " lost " ? Where was the money "saved" from going ?
If LTCM had gone broke, the paper wealth of its owners would have fallen. If any of them borrowed a lot to buy into LTCM (i.e., if they were heavily leveraged), they might have gone bankrupt. With LTCM itself bankrupt, its creditors would have lost a bunch. That would have encouraged them to cut back on loans to others (assuming it didn't drive them into backruptcy). Either of these encourage a cutback in loans and spending, encouraging recession. Any organizations similar to LTCM would have had problems, too. Paper wealth would have been destroyed. That's only a big problem if it corresponds to borrowings (leverage). -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
