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We,as advisors to clients abroad seeking acquisitions in the U.S.,Identify and research suitable candidates, and then take an active role in negotiating and executing transactions.

Included among our clients are U.S. corporations seeking synergistic acquisitions, divestitures and joint venture partners abroad.

OF INTEREST TO ALL.

Transparency is a prerequisite to the continued success of banking and related services.

Our Fearless Leader Takes Charge

"The Bank for International Settlements (BIS) agreed last year to allow banks to use their own internal models to measure how much capital they need as a cushion against swings in financial markets. The new rules should come into effect at the beginning of next year, but the Federal Reserve is allowing some US banks to introduce the system before then, if they can satisfy supervisors that their models work properly. Bankers Trust (the first) won approval to use the new technique for calculating its capital adequacy ratios at the end of the first quarter." (The Financial Times)

As you will recall, Bankers Trust was the bank that was sued by some of its largest clients including Procter and Gamble who has historically has been loath to make waves, for massive loses that they suffered at the hands of the Bank's derivatives area. Bankers Trust's trading for its own account hasn't been much better as the recently announced enormous loses incurred while dealing in Eastern European financial instruments. These transactions cost Bankers a hefty part of their capital and their stock has almost collapsed.

The Bank for International Settlements is an organization of central banks based in Basle, Switzerland. It was established in 1930, and thus is the oldest functioning international financial organization. The BIS was formed for the practical purpose of coordinating Germany's World War 1 reparations payments (hence the term "settlements" in the organization's name). However, its primary objectives, which have guided the Bank's activities since its inception and are reflected in its current role, were to promote cooperation among central banks and to provide additional facilities for international financial operations. The Basle Committee on Banking Supervision developed the international agreement on minimum capital standards for internationally active banks and continues to be the forum for designing a cooperative framework for supervision of international bank activities.

The Bank has not been a stranger to controversy and Alan Cowell seems to have put some of its historic background into focus. "In another tangled chapter in the "Nazi gold" affair, the Swiss-based Bank for International Settlements, which American officials suspected during World War II was acting in collaboration with Nazi leaders, confirmed today that gold transactions with the Germans included looted gold and ingots re-smelted in Nazi Germany to disguise their origin. 'It is fair to say our original focus has been to establish facts rather than to try to guess the motivations and opinions' of the wartime management, the bank's general manager, Andrew Crockett, said at a news conference in Basle today. Indeed, some American officials called for the bank's liquidation immediately after the war, accusing it of being dominated by Nazi interests. It is not clear from today's statement whether the wartime transactions listed by the bank were a front for other financial transfers linked to the German war effort" New York Times, Alan Cowell May 13, 1997,

Under the BIS aegis, banks can put up less and less money in their transactions, provided they satisfactorily demonstrate that the model they are using will work. What is frightening about this concept is the fact that it isn't the model that fails; it is the people implementing the model's dynamics that fail. Reducing financial requirements will only bring about additional leverage and far more severe problems. Henry Gonzalez, then House Banking Committee chairman said "A monstrous global electronic Ponzi scheme", when referring to derivatives.

HEDGE FUND! WHAT'S A HEDGE FUND?

Long-Term Capital soon proved Gonzalez right when not only did it collapse on September 23, 1998, but also the sums that they dealt in were so large that they almost brought the rest of the global economic community down with them. Only fast action by the New York Federal Reserve and the deep pockets of knowledgeable Wall Street executive saved the day. The New York time wrote an editorial on the mater on September 25, 1998, which puts the matter into prospective.

"The concept of "too big to fail" has now been extended to a huge hedge fund that was run by people thought to be financial wizards. (Two founders were Nobel Prize winners in economics) The bailout of the fund by a consortium of the country's leading financial institutions is a reminder of how fragile the world's financial markets now are, and of the risks of making big bets that markets will act in predictable ways."

"The hedge fund was run by John Meriwether, the former Salomon Brothers official widely viewed as a Wall Street genius. His forte was in trading bonds, buying those that were relatively cheap and selling those that were relatively expensive. The idea was to make a little money on each trade, and make a lot of money overall by using borrowed money to buy bonds in large quantities. For every dollar put up by investors in the fund, Mr. Meriwether seems to have borrowed more than $20."

"In determining what investments to make, Mr. Meriwether and his colleagues, had sophisticated computers that reviewed historical prices of bonds and other financial instruments and found relationships between them. Strategies were then calculated on the assumption that events that had never happened before could not happen at all. However, they did. Bond prices almost always rise and fall together. But in the current financial crisis, the prices of United States Treasury bonds have soared as investors bought them in search of safety while the prices of most other bonds - backed by corporations or by other governments - have fallen, as investors grew nervous about the risks involved.

Unfortunately, Mr. Meriwether, who at the peak was managing more than $1900 billion - the vast majority of it borrowed money - had bet against such an occurrence. After all, that is what happens almost all the time.

The odds were with Mr. Meriwether, whose fund returned profits of more than 40 percent a year in 1995 and 1996, and of 17 percent in 1007, even after hefty management fees. But betting the way he did turns out to be a little like Russian roulette; the odds of winning are very good, but you can't play again if you lose.

Effectively, Mr. Meriwether's fund has been taken over by the banks and brokerage houses that lent money to it. Investors in the fund - who had to put up a minimum of $10 million each - are likely to lose virtually all the money they invested. There is no public money in $3.5 billion bailout, but it was organized by the Federal Reserve, which stepped in because of fears that shaky financial markets would suffer even more if Mr. Meriwether's fund was forced to liquidate its holdings.

At best, markets will return to normal and the banks that kept Mr. Meriwether's fund afloat will make some money, perhaps even enough to share the original investors. At worst, markets will continue to sink and the bailout money will vanish.

The great bull market of the 1980's and 1990's has been built in significant ways on leverage, as big players found ways to borrow to the hilt. Not the banks that made the loans are getting nervous and demanding more collateral before lending to other hedge funds. That contraction in credit is prudent, but it will put more pressure on financial markets that are already feeling the strain.

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