The Crisis Before the Financial Crisis

Ten years ago, in September 2008, Lehman Brothers failed. It marked a decisive moment in the financial crisis, one where the U.S. economy plunged into what we now know as the Great Recession. With such a momentous anniversary approaching (September 15, if you want to mark your calendar), you can expect there'll be a slew of stories that look back at what happened and where things stand.

But there’s another anniversary that’s not getting as much attention. Ten years before Lehman, in 1998, the country faced another possible crisis, and at its center was another financial firm, Long-Term Capital Management.

LTCM, as it was known, was one of the world's largest hedge funds. But after Russia defaulted on its debt, LTCM faced a near collapse as a result of its investments along with too much leverage (a significant reason behind the financial crisis in 2008). The New York Federal Reserve Bank stepped in and organized a bailout of LTCM with the backing of the largest banks on Wall Street.

This week on Money Talking, Rob Cox, Global Editor of Reuters Breakingviews, discusses what we did — and didn't — learn from the global financial crash that nearly was, and what the lasting impacts we can see today.