When Genius Failed

This is business history for those who like to dwell on disaster. It charts the rise and fall of the investment company Long-Term Capital Management, formed in 1994 by John Merriweather who had been a leading figure in Salomon Brothers. For four years it racked up returns of 40% a year and amassed a staggering US$100 million of assets, virtually all borrowed, which it used to enter into derivative contracts producing over $1 trillion worth of exposure. The size of the operation and the scale of the risk boggle the imagination. But it all started to go wrong. Arrogance and greed led to greater and greater risks being taken, yet below the surface of their apparent respectability and success the alchemists of wealth fought to keep ahead of catastrophic failure. The author is a respected financial journalist with experience on the Wall Street Journal. He writes well and he knows the stage on which this drama was played out. The events, and the people a team that Time magazine dubbed 'the brightest and brokest' as things went from bad to worse are described here in detail. The story takes on the mantle of a thriller as success turns to failure following the collapse of markets in Brazil, Indonesia and Russia, and frantic rescue attempts are made with the entire American federal banking system drawn into the process. For those fascinated by the world of high finance and who hope to draw lessons (or perverse pleasure?) from the apparent genius of market men becoming all too fragile, this is a riveting read. Though the author tells his readers it is an unauthorized account, the sources acknowledged and thanked for their cooperation appear well placed to make it an authoritative, if sobering, tale. (Kirkus UK)