Epilogue Summary and Analysis

The brunt of the Long-Term situation was on the partners. They had forced many investors out before the fall to protect their own position. This meant they were the remaining parties who bore the burden of the financial collapse, and it cost the partners about $1.9 billion.

When the Fed lowered interest rates a week after the bailout, it did little to help Long-Term. The consortium lost $750 in its first week. There was also a global audit by the IRS of the management company and its affiliates. This meant that the partners could have tax liabilities. During the year after the bailout, the partners gradually left the firm.

The government studied the problem caused with Long-Term. The results recommended more reporting and disclosure requirements for hedge funds, better bank credit and risk management and stricter regulatory requirements. The problems were the lax...