After a tumultuous late summer of 1998, the market cracked under the pressure from the failure of highly leveraged
Long Term Capital Management
. Prodded by the
New York Federal Reserve
and deep self-interest, 14 of Wall Street's major powers stepped in to bail out the fund to which they had lent so many billions and to wrest control of its operations.
Once hailed as the best collection of financial minds ever assembled, the firm now is synonymous with excess and mismanagement. Its supertraders such as
and Nobel laureates like
had dug themselves a $3.5 billion hole by using unusually high amounts of borrowed money to establish their positions.
LTCM: Talk about it on
Now, one year from the day the Fed stepped in to rescue the market -- or at least the 14 banks that extended credit to Long Term Capital --
takes a look back and ahead at the lessons learned from the hedge fund's disaster.
Today, staff reporter
explores the LTCM time bomb and what other potential disasters could be lurking in the shadows of Wall Street. In addition, columnist
James K. Galbraith
probes where academia and the markets diverged to hasten LTCM's fall.
Friday, senior writers
take their shots. Roy
explains the way the hedge fund's folly impacted the way Wall Street thinks and measures leverage while Kapner brings us
up to date on what LTCM and its creditors are working on these days.