Which hedge fund’s 1998 collapse prompted a Federal Reserve-brokered rescue by major banks?

Long-Term Capital Management’s 1998 collapse prompted a Federal Reserve-brokered rescue by major banks.

Long-Term Capital Management, commonly called LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and Nobel Prize-winning economists, and it used complex models to pursue small pricing differences across markets.

The 1998 Russian financial crisis caused many of those positions to move against the fund. Because LTCM had extensive obligations to major financial institutions, officials feared that an uncontrolled failure could spread instability through global markets.

The Federal Reserve Bank of New York organized a private rescue in September 1998. Fourteen banks and investment firms provided about $3.6 billion in exchange for control of the fund; the Federal Reserve itself did not contribute money. LTCM was later liquidated.