Which hedge fund’s 1998 collapse required a private-sector rescue coordinated by the Federal Reserve Bank of New York?

Long-Term Capital Management’s 1998 collapse required a private-sector rescue coordinated by the Federal Reserve Bank of New York.

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 relied on mathematical models to pursue arbitrage strategies across global markets.

The Russian financial crisis of August 1998 caused severe market disruptions and losses for LTCM. Because the fund had many large, interconnected positions, financial institutions feared that a disorderly failure could destabilize markets.

The Federal Reserve Bank of New York helped arrange a $3.5 billion recapitalization by fourteen banks in September 1998. The Federal Reserve did not directly provide the rescue money or formally bail out the fund.