23 September 1998: Wall Street bails out LTCM

The New York Fed brought together major banks that agreed to put about $3.6 billion into Long-Term Capital Management, a hedge fund run by star traders and Nobel-winning economists. The fund had used massive leverage on trades that went wrong after Russia's default. Its collapse threatened the banks that had lent to it. Brilliant models, it turned out, could not survive leverage and a rare shock.

The lesson: Brilliant models plus heavy leverage can collapse when markets do something the models deemed impossible.