Long Term Capital Management: What You Need To Know

Not since J.P. Morgan gathered fellow bankers at his offices at 23 Wall Street to stem the stock market panic of 1907 have bankers organized such an elaborate emergency bailout to calm nervous markets. On Sept. 23, some 91 years later, representatives of 14 major banks and brokerage houses got together at the Federal ReserveBank of New York to deal with the collapse of Long-Term CapItal Management.

The Fed hosted the meeting and may have done some behind-the-scenes arm twisting. But as in J.P.'s day, it was the close-knit club of Wall Street chieftains who exerted pressure on each other to pony up $3.6 billion for the bailout. The deal got done because the firms were united in self-interest. They believed that it was necessary not only to protect themselves from big losses owing to their exposure to LTCM, but also from even bigger losses that could threaten the financial system.