When Genius Failed
THE RISE AND FALL OF LONG-TERM CAPITAL MANAGEMENT
The emblematic market meltdown story—how the smartest hedge fund ever failed.
A BUSINESS WEEK BEST BOOK OF THE YEAR
In this business classic—now with a new Afterword in which the author draws parallels to the recent financial crisis—Roger Lowenstein captures the gripping roller-coaster ride of the Greenwich, Ct. hedge fund, Long-Term Capital Management. Drawing on confidential internal memos and interviews with dozens of key players, Lowenstein explains not just how the fund made and lost its money but also how the personalities of Long-Term’s partners, the arrogance of their mathematical certainties, and the culture of Wall Street itself contributed to both their rise and their fall.
When it was founded in 1993, Long-Term was hailed as the most impressive hedge fund in history. But after four years in which the firm dazzled Wall Street as a $100 billion moneymaking juggernaut, it suddenly suffered catastrophic losses that jeopardized not only the biggest banks on Wall Street but the stability of the financial system itself. The Fed-orchestrated private bailout of Long-Term, forced on the big banks in 1998, shocked Wall Street and shattered all precedent. Since the mortgage meltdown that would strike all of Wall Street, from Lehman Brothers to AIG, a decade later, When Genius Failed seems only more timeless. As Lowenstein shows in his new Afterword, the story of the Nobel Prize-winning hedge fund “geniuses” is truly a parable for market meltdowns in an age of instability.
“Story-telling journalism at its best.”
“A riveting account that reaches beyond the market landscape to say something universal about risk and triumph, about hubris and failure.”
—The New York Times
“[Roger] Lowenstein has written a squalid and fascinating tale of world-class greed and, above all, hubris.”
“Compelling . . . The fund was long cloaked in secrecy, making the story of its rise . . . and its ultimate destruction that much more fascinating.”
—The Washington Post