The banks’ willingness to finance Long-Term without any haircuts had enabled the fund to operate right up to the edge. Now, if it defaulted, nothing would be left. Not surprisingly, the lenders were horrified by what they had wrought. “We had no idea they would have trouble—these people were known for risk management. They had taught it; they designed it,” reflected Dan Napoli, the Merrill risk manager who had so enjoyed golfing with the partners in Ireland. “God knows, we were dealing with Nobel Prize winners!” Ironically, only a very intelligent gang could have put Wall Street in such peril.
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