The short answer: Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether that nearly collapsed in 1998 after heavy losses on borrowed money. To avoid a fire sale, 14 banks and brokerage firms put in $3.625 billion to take over 90% of the fund, in a rescue the Federal Reserve organized but did not pay for.
A company profile from The Pomp Podcast, hosted by Anthony Pompliano. Last updated: October 25, 2026.
Key takeaways
Long-Term Capital Management was a hedge fund founded in 1994 by John Meriwether.
It held about $30 of debt for every $1 of capital and nearly collapsed in 1998 after Russia's default.
Fourteen banks and brokerages put in $3.625 billion for 90% of the fund in a rescue the New York Fed organized but did not pay for.
What was Long-Term Capital Management?
LTCM was founded in February 1994 by John Meriwether, a former vice chairman of Salomon Brothers, and was led by a team that included two Nobel laureates, according to the Federal Reserve's history of the episode. It used mathematical models to profit from small, temporary price differences between similar securities, betting those prices would come back together.
It worked for years. The fund returned 20% in 1994, 43% in 1995, 41% in 1996 and 17% in 1997, according to the Fed history.
Why did LTCM fail?
Leverage. At the end of 1997, LTCM held about $30 of debt for every $1 of capital, according to the Fed history. In August 1998, Russia devalued its currency and stopped paying its debt. Investors rushed into safer assets, and the price gaps LTCM was betting would shrink got wider instead. The fund lost 44% of its value in August alone.
Did the Fed bail out LTCM?
Not with its own money. The Federal Reserve Bank of New York brought LTCM's lenders together. On September 23, 1998, 14 firms put up $3.625 billion in exchange for 90% of the fund, according to the Fed history. The Fed did not lend any of its own funds. The deal avoided a fire sale and allowed an orderly wind-down of the fund's holdings.
The story is told in Roger Lowenstein's book When Genius Failed.
What did The Pomp Podcast say about LTCM?
On the October 17, 2026 episode, "Is Bitcoin Ready To Rip While Wall Street Breaks? | Jordi Visser", Pomp asked Jordi Visser about LTCM. Quotes below are from the episodes, with timestamps.
"you've got some very unique thoughts this week on long-term capital management and how we may be living through a very similar time right now."
Jordi said he saw LTCM's trades firsthand while working in Brazil:
"I was in Brazil. I got to see LTCM on the other side of their trades."
He described one LTCM trade in Brazilian telecom company Telebras, where LTCM bet that two classes of shares would converge in price before a privatization:
"Well, before that date happened, the spread widened out."
He said hedge funds today face the same risk LTCM did:
"You are making a bet as to how long your investors will stay with you."
Jordi also said he was part of the LTCM wind-down after he returned to New York, and pointed out how the rescue worked:
"I don't think people realize when LTCM went out, the Fed didn't bail them out."
His recollection that the banks put in "slightly less than $4 billion" lines up with the $3.625 billion in the Fed history.
On October 24, "Will Bitcoin Survive Quantum Computing? | Jordi Visser", he came back to the comparison:
"And I mentioned that this reminds me of LTCM. It does. It also reminds me of the quant quake back in August of 2007."
Every Pomp Podcast episode that discussed LTCM
LTCM came up in 2 recent episodes of The Pomp Podcast. Each link opens the YouTube video at that moment.
Oct 17, 2026: Is Bitcoin Ready To Rip While Wall Street Breaks? | Jordi Visser. Jordi Visser compared today's markets to LTCM. Timestamps: 1:13 (Pomp's question), 3:36 (LTCM in Brazil), 7:30 (betting on investors and lenders), 11:03 ("the Fed didn't bail them out"), 16:42 (30-to-1 leverage), 57:23 (capital needs of AI).
Oct 24, 2026: Will Bitcoin Survive Quantum Computing? | Jordi Visser. Jordi returned to the LTCM comparison. Timestamps: 16:56 (LTCM and the 2007 quant quake).
Watch or listen to the episode
Is Bitcoin Ready To Rip While Wall Street Breaks? | Jordi Visser, released October 17, 2026. The LTCM discussion starts at 1:13.
Opinions from guests on The Pomp Podcast are their own. Nothing on this page is a recommendation to buy or sell any security.
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Frequently asked questions
What was Long-Term Capital Management?
LTCM was a hedge fund founded in 1994 by former Salomon Brothers vice chairman John Meriwether. It used heavy leverage to bet on small price differences between similar securities.
Why did LTCM collapse?
It held about $30 of debt for every $1 of capital. When Russia defaulted in August 1998, the price gaps it was betting on widened, and it lost 44% of its value that month.
Did the Fed bail out LTCM?
No. The New York Fed organized a rescue in which 14 firms put up $3.625 billion for 90% of the fund. The Fed did not lend any of its own funds.
What book is about LTCM?
When Genius Failed, by Roger Lowenstein.
Why is LTCM in the news in 2026?
On The Pomp Podcast, Jordi Visser compared today's leveraged hedge funds and the money needed for AI to the conditions behind LTCM's collapse.
Sources
Last updated: October 25, 2026
Anthony Pompliano is an entrepreneur, investor, and author who serves as Chairman and CEO of Silvia, Inc (SVIA) and invests through Pomp Investments. He is the host of The Pomp Podcast, where he interviews founders, investors and economists about bitcoin, markets, AI and the economy.
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This profile is for informational purposes only and reflects reporting available as of October 25, 2026, plus opinions shared on The Pomp Podcast. It is not investment advice. Do your own research before making any investment decision.
