SHOULD THIS HEDGE FUND HAVE BEEN SAVED?
I was amused to read the last paragraph of "The rescue: What you need to know" (News: Analysis & Commentary, Oct. 12), regarding the fate of Long-Term Capital Management (LTCM) and its partners. That paragraph describes the possibility of personal financial losses on the part of the partners as a "vicious punishment."
Each time a business fails, business owners who manufacture or offer real products or services suffer punishments as "vicious" as or worse than those meted out to the LTCM partners. The real economy sentences hundreds of thousands of business owners to vicious punishment each year. The existence of the LTCM bailout proves that among the financial elite, capitalism isn't understood or accepted (at leastfor financiers). Instead of worrying over losing a few dollars, the LTCM partners should thank their lucky stars that the traditional punishment for bad debts was abolished at the founding of the republic: debtor's prison.
Richard S. Adler
All the articles I have read on the LTCM bailout suggest that the fund's brilliant managers went too far and were irresponsible in using their massive leverage. Perhaps. But isn't it also possible that they were astoundingly brilliant in their use of leveraging to guarantee against total failure? It seems to me that if I manaGed a fund and were nervous about making risky bets with other people's billions, it would be prudent to find a way to buy insurance against potential loss, no matter how remote that possibility might seem.
I don't have to be a rocket scientist to recognize that the bigger I become (finaNcially speaking), the less likely it is that the U.S. finanCial community would allow me to fail. Therefore, it would seem that borrowing excessively could be a smart way to bulk up for a potential bailout. Is it possible that our country's policies encourage the creation of financial monsters?
Gino J. Coviello
Palm Coast, Fla.Return to top
DOUBT ABOUT A FAT DRUG IS ON THIN GROUND
I believe that "The new fracas over fat pills" (Science & Technology, Sept. 28), which highlights unpublished experimental studies by Dr. Richard J. Wurtman and his colleagues, may have unnecessarily created false impressions and fears among readers.
There is a serious question about Wurtman's attempt to conclude from a 1970s published study that phentermine inhibits monoamine oxidase (MAO). The doses used in that study--not performed on humans--were far above approved amounts taken by patients using phentermine. Given this fact, the relevance of this study to phentermine users is questionable. Thus, despite the contentions in your article, the data do not support Wurtman's hypothesis that phentermine should be labeled an MAO inhibitor.
It is important for readers to understand that fenfluramine and defenfluramine were pulled from the market because of associations with heart and lung problems; phentermine remains available for use as a Food & Drug Administration-approved anti-obesity drug.
Benedict R. Lucchesi
Professor of Pharmacology
Univ. of Michigan Medical School
Ann Arbor, Mich.Return to top
A FINANCING STRATEGY FOR STIMULATING JAPAN
"A talk with Treasury Chief Rubin" (Special Report, Oct. 12) closes with Secretary Rubin's view that all should try to contribute to stimulating Japan's economic growth. Just as it is a known folly to print money to fuel ongoing inflation, it could be wisdom to print money to check ongoing deflation.
Perhaps the most reliable way to get the printed money into circulation would be to deposit it to the credit of the wounded Asian economies with the proviso that the deposits only be drawn down to pay for imports of Japanese goods or services, thereby stimulating production and employment in Japan and in the countries benefiting from the grants-in-aid. This financing device could encourage much larger aid programs than might otherwise be provided.
Of course, the Japanese banking problems also need to be addressed. However, as the pileup of unused lending capacity in the U.S. banking system in the late 1930s demonstrated, ample credit availability will not induce people or businesses to borrow and spend, unless they feel optimistic about their future and see good uses for the money.
Jetson E. Lincoln
Montclair, N.J.Return to top