Which hedge fund's 1998 collapse prompted a Federal Reserve-organized rescue of Long-Term Capital Management?

The hedge fund whose 1998 collapse prompted a Federal Reserve-organized rescue was Long-Term Capital Management.

Long-Term Capital Management, or LTCM, was founded in 1994 and employed prominent traders and academics, including Nobel Prize-winning economists Robert Merton and Myron Scholes. Its strategies relied heavily on mathematical models and leveraged relative-value trades.

The 1998 Russian financial crisis caused markets to move in ways that LTCM's models had not adequately anticipated. Losses threatened the firm's ability to meet obligations, raising fears that forced liquidation could spread through global financial markets.

The Federal Reserve Bank of New York organized a private-sector rescue in September 1998. Fourteen banks and investment firms contributed capital, while the U.S. government did not directly provide the bailout money. The episode became a major warning about leverage, interconnected counterparties, and risks outside traditional banks.