Every so often, a trading blow-up or fraud cripples a financial institution. E.F. Hutton, Drexel Burnham Lambert, Salomon Brothers, Kidder Peabody, Barings, Long-Term Capital Management. The question raised by the collapse of the futures broker Refco is: what took so long?
In the 1980s and 1990s, a regular flow of financial mishaps caused the customers and depositors of the latest troubled investment bank or fund to run for the exits. But it was seven years ago that the whizz-kids of LTCM were humiliated by the knock-on effects of Russia’s debt default. It has been a long, lean season since then for the prophets of doom who expect trouble to break out in capital markets at any moment.
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