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Cramer actually has precedent. Alan Greenspan dropped interest rates, after the collapse of Long Term Capital Management(LTCM),to restore confience in the market.

Your post made me dig out my copy of Roger Lowenstein's "When Genius Failed". (The Rise and Fall of Long Term Capital Management) Fourth Estate 2002.(Keep the publishers happy, buy a copy).

See Page 229-230, Lowenstein has this quote by Alan Greenspan, "To be sure, some moral hazard, however slight, may have been created by the Federal Reserve's involvement." Lowenstein records that Greenspan had done so because the negatives were outweighed by the risk of "serious distortions to market prices had Long Term been pushed suddenly into bankruptcy."

For those who like to keep score, $1 invested in LTCM in Mar 1994 was worth 23c in Oct 1998 (after management fees had been deducted).

We are certainly seeing serious distortions to market prices.

Elaine Meinel Supkis

Greenspan wanted to save his drinking buddies (the guys running that fund all hang out with him socially!). Greenspan NEVER wants to save you or me.


Elaine, please stop. I don't want to think about Alan Greenspan after a few drinks (unless I had a few myself). Couldn't handle the pontification, index finger in the air and babbling on about the economy.

Even worse, could you imagine being one of his tennis buddies and forced by Andrea to let him win match after match?

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