To begin, LTCM was not the one bailed out. The banks that recklessly lent credit to LTCM were. Reports of the meeting in the Fed boardroom clearly indicate unaffected market players were forced to participate, against their better judgment. The reckless creditor banks were not required to take their medicine. Today these banks have toxic waste on their books, and freely move these on and off the books to hide losses (see Oct 10 article in WSJ on pricing problems). There you have the direct effect of that bailout.

Next, to say Greenspan tried to raise long term rates is disingenuous. Telegraphed quarter point raises over long periods do not resemble the kind of action the Fed should take to quell speculation. Taking the punchbowl away requires stiff raises over short periods, which no one at the Fed since Volcker had the guts to do.

I do not know what Greenspan intended with his statement on ARMs, so will not blame him for that. But his repeated denials of the possibility of a housing bubble, when it was obvious to many of us, encouraged all participants in the bubble. A cardinal sin for a central banker.