Bond arbitrage has been likened to picking up nickels in front of a steam roller. Leveraged to the hilt, LTCM transformed such nickels into billions of dollars. Eventually success caught up with them. Their capital grew to exceed available opportunities, so they "diversified" into risk arbitrage, shorting volatility and outright directional bets. When Asia caught the flew and Russia defaulted on debt, markets plummeted, volatilities rose and spreads widened. The steam roller had finally caught up with LTCM.

Roger Lowenstein has written the definitive history of the LTCM debacle. He describes John Meriwether's early career at Solomon brothers, and how he and the traders from Salomon's arbitrage desk formed LTCM in the early 1990's. He details the firm's initial fund raising, banking relationships, trades and internal politics. He describes the fund's evolution from pure bond arbitrage to other strategies in which the partners had no real expertise. He takes us inside Bear Stearns, Goldman Sachs, Merrill, JP Morgan, Chase, UBS and other financial institutions and explains each one's unique relationship with LTCM. Finally, Lowenstein describes how the fund fell ... the Fed's orchestrated bailout, how Goldman Sachs front-ran the fund while spearheading an independent rescue effort, and the tense negotiations that barely prevented a bankruptcy.