Learn what happened in business in today’s past

 

September 23:

1998: Wall Street's top investment banks, encouraged by the Federal Reserve, complete marathon negotiations for a $3.65 billion bailout of the giant hedge fund Long-Term Capital Management, which lost nearly $2 billion in a single month when the mathematical models designed by two Nobel laureates failed. And Fed chairman Alan Greenspan tells Congress that the global economic crisis triggered by Russia's loan default is "likely to intensify" pressure on the U.S. economy. All of this is good news, reckons Wall Street-on the assumption that the Fed will have to cut interest rates. In response, the Dow Jones Industrial Average shoots up 257.21 points.

Roger Lowenstein, When Genius Failed: The Rise and Fall of Long-Term Capital Management (Random House, New York, 2000), pp. 201-208; The Wall Street Journal, September 24, 1998, pp. A2, C1; Bong-Chan Kho, Dong Lee and Rene M. Stulz, "U.S. Banks, Crises, and Bailouts: From Mexico to LTCM," National Bureau of Economic Research, working paper 7529 (http://www.nber.org/papers/w7529), pp. 6, 9; http://www.federalreserve.gov/boarddocs/testimony/1998/19980923.htm; http://commdocs.house.gov/committees/bank/hba51526.000/hba51526_0.htm; http://www.djindexes.com