When Genius Failed: The Rise and Fall of Long-Term Capital Management

by Roger Lowenstein

Meriwether greeted the bankers with aplomb, but Hilibrand looked haggard and nervous; the losses had taken a toll on the master trader, who was also so personally leveraged. By now, meetings between Long-Term and inquiring bankers had a staged, too-familiar air. The partners were weary of reluctant suitors; what’s more, markets were moving so fast that the bankers had no way of knowing what the portfolio was worth. Conservatively valuing the portfolio at a discount, the bankers arrived at bids for the various pieces that added to little more than zero. Haghani seemed wounded by their minimal valuations. “Thank you for coming,” he told a Merrill banker with an air of rebuke, “but we don’t think you’re right. You ought to be investing with us.” He was like a drowning man trying to dictate terms to a rescuer on shore; in his heart of hearts, he was unsinkable. But Long-Term had sustained another loss Tuesday of $152 million, taking its equity down to $773 million. Jimmy Cayne, chief executive of Bear Stearns, advised Fisher that Long-Term had enough cash to get through Tuesday—but Wednesday could be a problem.13 What could it possibly do in twenty-four hours? The Morgan option was dead. Corzine doubted that “Mr. Big” would surface, either. That left it to Allison.