# kaal:claim:2998097-003

**Claim.** Because banks and brokers had let LTCM borrow the full value of its collateral, LTCM's 4.8 billion dollars in capital dissipated quickly once banks began making margin calls.

**Type.** mechanism  **Support.** argued

**Holds when.**

- LTCM, 1998
- 100 percent collateral lending by banks and brokers

**Source quote.**

> Because banks and brokers had allowed LTCM to borrow 100 percent of the value of its collateral prior to the worsening of LTCM's financial condition in 1998, LTCM's $4.8 billion in capital dissipated quickly when the banks began to make margin calls.

**From.** Wulf A. Kaal, *Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016* (2017), III. Failure of Long-Term-Capital Management, page 10

**Cite as.** Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097

**Verify.** sha256 of source PDF `0955054f49c7011d33c285579bb046e6b284e42755b10fd2546a728c202669d5` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202017%20-%20Private%20Investment%20Fund%20Regulation%20-%20Theory%20and%20Empirical%20Evidence%20from%201998%20to%202016.pdf

**Failure mode.** Full collateral value lending collapses capital under margin calls  (family: systemic-risk-transmission)

**Topics.** defi

**Keywords.** ltcm, leverage, margin-calls, counterparty-lending

**Related claims.**

- extended_by: https://wulfkaal.github.io/claims/3405660-011

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.