Moreover, our sense was that the consequences of a fire sale triggered by cross-default clauses, should LTCM fail on some of its obligations, risked a severe drying up of market liquidity. The plight of LTCM might scarcely have caused a ripple in financial markets or among federal regulators 18 months ago--but in current circumstances it was judged to warrant attention.
What is remarkable is not this episode, but the relative absence of such examples over the past five years. Dynamic markets periodically engender large defaults.