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

by Roger Lowenstein

By far, the firm where unease lay heaviest was Travelers. The firm’s bosses had been shocked to learn that the fixed-income arbitrageurs at Salomon Brothers, their newly acquired subsidiary, routinely took home year-end bonuses of $10 million and more. Weill and his top lieutenant, Jamie Dimon, were hostile to the star system pioneered by Hilibrand, under which traders at Salomon (now Salomon Smith Barney) took home a percentage of their profits. Since the traders were not penalized for losses, they had a perverse incentive to bet as much of the company’s money as they could. Essentially, Weill and Dimon viewed arbitrage as a dressed-up form of gambling. Not surprisingly, they took a dim view of Long-Term, a major Salomon client. Shortly after the merger, Dimon asked Long-Term for more information. Meriwether reflexively replied that such information was private. Dimon, who had no allegiance to Greenwich, threatened to cut Long-Term off, and J.M. meekly complied with Dimon’s request.9 A new breeze was blowing.