In Brief World News Review Troubled Hedge Funds Tip of the Iceberg

Posted on Jul 22, 2010 by Cecil Maranville, David Palmer, John Ross Schroeder, Mario Seiglie Estimated reading time: 2 minutes

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Financial concerns continue as a large U.S. investment trust, Long Term Capital, collapsed in early October and the Federal Reserve organized its rescue. TIME magazine reported: "Last week's bailout raised twin fears in Washington and on Wall Street as tall as Manhattan's Twin Towers. The first: that Long Term Capital's financial troubles are shared by many of the country's 4,000 hedge funds-lightly regulated and often secretive, high risk vehicles for sophisticated investors.... The second fear is that the Long Term Capital bailout could encourage banks to make still more risky loans, confident that the government won't let them get into trouble.... Wall Street insiders say what really spooked the Fed [into lowering interest rates] was indications that Long Term Capital had off-balance sheet derivative contracts with a value of more than $1 trillion.... Says House banking chairman Jim Leach, who plans to hold hearings in the next week or two: 'The question that remains for the economy is what other risk exists in the hedge-fund and derivatives industries'" (October 5, 1998, pages 34-36).

The world is slowly coming to understand that a lot of money in banks and investment institutions is being used for "gambling" on which way interest rates, stocks or currencies will go. Regarding the Long Term Capital collapse, Ken Guenther, executive vice president of the Independent Bankers Association of America asks, "Why wasn't the Fed blowing the whistle on these totally inappropriate, crapshoot investments by some of the biggest banks in the country?" (Ibid., page 36).

The problem is that much of the investments were made when the world economy appeared to be booming, and there was little risk that there would be a recession. Much of the money was carelessly invested. "Why did Long Term Capital suddenly lose money after years of winning? Short answer: the fund's investing formulas were blindsided by the financial meltdown that has spread so rapidly from Asia to Russia and Latin America" (Ibid., page 36).

The world economy has always had an important role in creating an international political climate. It is no coincidence that a man such as Hitler rose to power mainly due to the distress caused in Germany by an economic depression. Will the world economy recuperate-or will it sink because of the reckless investments of greedy men who used much of the people's savings to bet as if they were in a gambling casino? ( TIME)

Cecil Maranville
David Palmer
Born in Saskatchewan Canada, David Palmer was first introduced to the radio broadcast of the World Tomorrow during his career in broadcasting, when the program was aired during his on air shift. In 1965 his radio career took him to Vancouver British Columbia, where he was eventually baptized, and began attending Sabbath services. He was ordained to the ministry in 1983. Now retired from broadcasting David currently pastors congregations in Vancouver, and Vancouver Island.
John Ross Schroeder
(1937-2014)
John died on March 8, 2014, in Oxford, England, four days after suffering cardiac arrest while returning home from a press event in London. John was 77 and still going strong.
Mario Seiglie
United Church of God Pastor
Mr. Seiglie was born in Havana, Cuba, and came to the United States when he was a child. He found out about the Church when he was 17 from a Church member in high school. He went to Ambassador College in Big Sandy, Texas, and in Pasadena, California, graduating with degrees in theology and Spanish. He serves as the pastor of the Garden Grove, CA UCG congregation and serves in the Spanish speaking areas of South America. He also writes for the Beyond Today magazine and currently serves on the UCG Council of Elders. He and his wife, Caty, have four grown daughters, and grandchildren.