Author Question: Why did the Fed step in to organize a rescue for Long Term Capital Management (LTCM) in September, ... (Read 61 times)

bobthebuilder · **on:** Jun 30, 2018

Why did the Fed step in to organize a rescue for Long Term Capital Management (LTCM) in September, 1998, rather than simply letting the trouble fund fail? Was the Fed's action necessary or advisable?

What will be an ideal response?

Question 2

A two-tier gold market like the one created during the Bretton Woods System refers to

A) a private tier for private gold traders where the price would not be allowed to fluctuate, and an official tier for central banks where the official gold price would be allowed to fluctuate.
B) a private tier for private gold traders where the price would not be allowed to fluctuate, and an official tier for central banks where the official gold price would rise on a yearly basis by pre-determined increments.
C) a private tier for private gold traders where the price would be allowed to fluctuate, and an official tier for central banks where the official gold price would be set at 35 an ounce.
D) a private tier for private gold traders where the price would be set at 35 an ounce, and an official tier for central banks where the official gold price would be allowed to fluctuate.
E) a private tier for private gold traders where the price of gold would rise on a yearly basis by pre-determined increments, and an official tier for central banks where the official gold price would be set at 35 an ounce.

Eazy416 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

To avoid what the Fed perceived as a possible meltdown of international banking caused by the crisis in Russia and when Asia and Latin American economies were already facing a steep economic slowdown. The problem is moral hazard.

Answer to Question 2

C