A seasoned financial regulator with experience in China, Hong Kong, and Malaysia, Sheng has written a fascinating insider's account of the Asian financial crisis of 1997-98 from the perspective of Hong Kong's central bank, the Hong Kong Monetary Authority. In particular, he recounts the hedge funds' "play" against the Hong Kong government's commitment to fix the exchange rate for the Hong Kong dollar to the U.S. dollar: the Hong Kong Monetary Authority's surprising and shrewd move to buy Hong Kong stocks that hedge funds and others had sold short imposed disciplinary losses on them and ultimately made money for the Hong Kong authorities. Sheng draws useful parallels between the financial crisis of 1997-98 and that of 2007-9 and provides mature and levelheaded guidance to financial regulators everywhere. Remarkably, in 2005 an intergovernmental committee of regulators identified almost all the dangers in the prevalent approaches to risk management that subsequently materialized. But financial firms and politicians chose not to pay attention. It is difficult to trim the sails when the winds are favorable.
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