For me, the defining characteristic of the late nineties wasn’t the dot-coms. Most people were exposed to the NASDAQ because, frankly, at the time there was no getting away from it. It had seeped into everything, transforming from a financial niche bleeding eventually into the entire worldwide culture. We all remember the grocery clerks who became day traders.

Behind all that was some darker evolutions. It was a period where the growth in the shadows broke out in more than the quantitative. In the eighties Wall Street had lusted after the possibilities represented by the computer revolution. In the nineties, those opportunities became real enough.

The first to jump on them was John Meriwether. He gathered Economic titans like Robert Merton and Myron Scholes to attempt to exploit what many believed was the new way of doing things; the only way to do things in the future. They were going to trade derivatives off-balance sheet because that was the way the world was set up, and their math was the key to exploiting the opportunity (dark leverage).

LTCM blew up in September 1998. That was toward the end of the process, not the beginning. What became the Asian flu (the defining event of the era in my mind) began more than a year beforehand. There were, as always, warnings, small tremors out there in the midst of what were at the time called Asian tigers.

Though nobody was ignoring the fireworks in Thailand and Indonesia, it was their transmission to Japan in later 1997 when things really got serious. Several big Japanese trading houses went insolvent doing some of the things (in “dollars”) LTCM was doing in a big way. The DJIA even plummeted 554.26 points, or 7.18%, on October 27, 1997.

Early in 1998, the crisis only grew worse, particularly for Japan. At that year’s February FOMC meeting, American monetary officials discussed several covert transactions undertaken between them (likely via FRBNY) and the Bank of Japan as well as Japan’s Ministry of Finance. The latter two entities were badly in need of “dollar” financing.

How much? We don’t know to this day because the transcripts are full of blanks where numbers should be.

MR. FISHER We took [blank] of bills into the SOMA account, selecting bills that we would be able to run off in the course of January so as not to make our need to drain reserves any worse at the end of the month. We sold [blank] for them in the market and took another [blank] out of the repo pool, where we have had an elevated cash balance for them, to help them in effect to meet their cash needs. We also actually arranged a transaction between the Bank of Japan and the Ministry of Finance during the period; one wanted to sell bills and the other to buy.