kaal:claim:2998097-004

Banks overexposed themselves to private investment fund lending, which allowed LTCM and similar funds to grow significantly and led banks as counterparties to put their own existence at risk.

However, banks overexposed themselves to private investment fund lending, allowing LTCM and other private investment funds to grow significantly. As counterparties to private investment funds, such as LTCM, banks put their own existence at risk with their lending practices.

Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017), III. Failure of Long-Term-Capital Management, p. 11
https://ssrn.com/abstract=2998097 · source PDF

Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097

• banks lending to private investment funds
• pre 1998 lending practices

failuresupport: arguedfailure: Counterparty overexposure to private fundsfamily: systemic-risk-transmissionsystemic-riskdefirisk-and-incentives

• restated_by kaal:claim:3405660-011 LTCM reached systemically dangerous size because banks lent to it without regard to repayment capacity, and in...
• supports kaal:claim:1806252-013 Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge...

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