A Stress Test for Investment Banks

How could the current credit crunch affect their profitability? S&P Ratings looks at the effects of the 1998 market gyrations for clues

Following the Russian default on Aug. 17, 1998, equity market volatility jumped dramatically. Several banks revealed losses on Russian bonds. Most dramatically, the U.S. Federal Reserve Bank arranged a bailout of the collapsed hedge fund managed by Long-Term Capital Management.

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