The Case Analysis Of Rescue For LTCM Crisis

In 2008,the outbreak of the United States Sub loan crisis not only destroyed the United States Financial and macro economy,but also had a significant impact on the global financial system and the world economy. Governments, central banks and regulatory agencies in the reflection of the crisis, but also actively seeking ways and measures to restructure the financial system safety net, trying to slow down the negative effects of the crisis. One of the most controversial measures is how to deal with the problem of financial institutions. Specifically, is to follow the principles of market economy, so that the survival of the market to determine whether the agency or not, or contrary to the principles of market economy, by the government to help. The subprime crisis between China and the United States the Fed and the Treasury disposal strategies for different problem financial institutions Lehman and Bear Stearns, will the debate to a peak, leads to the problem is not just an economic issue in theory and practice, and even become a legal issue in theory and practice. Based on this background, it is of great theoretical and practical significance to analyze, the problems of financial institutions from the perspective of economy.The Long-term Capital Management is the crisis in the history of a successful disposed of the case, although for the rescue itself still exists some controversy, but the for the stabilization of the financial system has been generally recognized. Therefore, to government departments come forward to coordinate, the private sector to participate in rescue mode has been studied the financial crisis of economists and jurists as a classic case of repeatedly mentioned. The to this model as a starting point in the analysis, through the introduction of cost-benefit analysis framework, analyzes the Fed on the long term capital management company to rescue, rescue and relief of costs and benefits, the conclusion, the Federal Reserve Bank of New York and the Fed to salvage behavior of LTCM in crisis situations at that time is a last resort approach, this approach although in a certain extent interferes with the optimal allocation of resources, but avoids the caused greater damage to the U.S. financial markets. This is not only to protect the LTCM’s creditors and investors, but also to protect the financial markets, the interests of the people, so the cost is greater than the cost. At the same time, it needs to be pointedout that compared with the traditional mode of government assistance, this model of government coordination and private sector participation has a greater advantage.With the further opening of China’s capital market, and interest rate reform basically completed, China is also increasing its exposure to the volatile situation of the world economy, the tides, and diverse financial risks. Currently effective prevention and defusing of financial risks, and the maintenance of financial stability, is an important task. The analysis for the LTCM incident, which read of the US financial regulatory authorities in the actual operation of how to balance all forces, until a conclusion that satisfies the interests of all. In relation to the subprime crisis, the Federal LTCM bailout cost is lower, higher income, but unspent financial resources and thus the private sector participation in the salvage and other ways worth reading and pondering. Therefore, in order to analyze this incident as an example of new ideas to enrich our financial supervision and management of financial crisis if a bailout became necessary in the future it has a profound significance.