Why Did the Fed Step in to Organize a Rescue

question 127

Essay

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?

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Definitions:

Legal Expenses

Costs incurred by an entity related to the legal services provided for the business, such as attorney fees, litigation expenses, and other legal consultancy fees.

Depletion

Depletion is an accounting method used to allocate the cost of extracting natural resources such as minerals, oil, and gas from the earth over the period they are consumed.

Straight-Line Method

A method of calculating depreciation of an asset, which spreads the cost evenly across its useful life.

Units-of-Activity Method

A depreciation method that allocates costs based on the actual usage or output of the asset rather than time.