So, you are in charge of investing $4.5 billion.
You hire two Nobel Prize economists to generate computer models on how to invest in world bond markets.
You borrow billions more and put down a big chunk on a bet that differentials between certain world bond prices, out of kilter because of the global crunch, will revert to their historic levels. They don't. You lose $4 billion.
Your clients -- who needed to pony up $10 million just to be in your hedge fund -- are apoplectic. They call. They want to know what the hell is going on.
Boom and bust?
Don't be silly. That's capitalism for the small guy. If we go to Atlantic City or Las Vegas, make a bundle and then lose it all, that's boom and bust. For the rich, it's boom and bailout.
So, you're John Meriwether, the bond trader who was forced to leave Salomon Brothers in 1991 after a trading scandal. And you leave to start Long-Term Capital, and for the first couple of years, you are making 30 percent return on investment for your millionaire friends. And they are loving it. And then you lose the $4 billion.
Who do you call?
The Federal Reserve Board -- bailout central.
So it was on a hot, steamy New York September day, That New York Federal Reserve Bank President William J. McDonough received a phone call from Meriwether and bailout fix-it man supreme David W. Mullins Jr., the architect of the bailout of the savings and loans under President Bush.
Big institutional investors in the hedge fund -- Merrill Lynch & Co., Goldman Sachs & Co., Bear, Stearns & Co. and Bankers Trust Corp. -- were also calling begging for a bailout.
These companies were, of course, seeking to save their own skin. But McDonough put forth the official spin before a House of Representatives Committee earlier this month.
"Everyone I spoke to that day voiced
concern about the serious effect the deteriorating situation of Long-Term Capital could have on world markets," McDonough said.
Ah yes, world markets. And so McDonough calls Fed. Chair Alan Greenspan and Treasury Secretary Robert Rubin and a bailout is arranged.
Former Lehman Brothers partner and current financial columnist Michael Thomas is right it was improper for the Federal Reserve to arrange a private bailout. If Merrill Lynch and Goldman Sachs want to protect their behinds by arranging for a private bailout, fine. But the Fed. should have stayed out of it. 
Or, as former Fed Chair Paul Volcker asked in a speech, "why should the weight of the Federal Government be brought to help out a private investor?"
"Capitalists now all want it one way," Thomas says. "They want to do whatever the hell they feel like, but let someone else pay. It's called privatizing the profits and socializing the risks."
Hedge funds, which make complicated financial bets with millions and billions of borrowed dollars and are almost totally unregulated, do indeed pose risks to the economy. Because of the nature of their gambles, they can lose huge amounts of money, leaving investors holding the bag (minus a bailout). Even worse, they use
borrowed money to exert extraordinary influence over markets and cause serious problems when they overreact en masse to new fads. (That's a big part of why the value of the dollar has suddenly plunged recently, for example.)
But these are reasons why hedge funds must be subjected to regulatory discipline -- not an argument for why high rollers deserve government-orchestrated bailouts.
With the global financial system in frenetic disarray, Long-Term Capital is not likely to be the last financial player to go bust. If the government is not able to act quickly to rein in hedge funds and other unbridled financial activities, it should at least declare that no bailouts will follow in the wake of Long-Term Capital. Each bailout makes the next one more likely, as investors are given implicit assurances that they will not have to face the downside of risky bets gone bad.
The gamblers in Atlantic City don't get this kind of treatment; neither should those on Wall Street.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate
Crime Reporter. Robert Weissman is
editor of the Washington, D.C.-based
Multinational Monitor.
More Manure Violations and Spills. 
A new study conducted by The Arkansas Public Policy Panel and The Arkansas Coalition for Responsible Swine Production shows that violations at Arkansas confined hog feedlots are more serious than once thought. A previous study by the Panel and the Coalition found that more than half of the confined hog feedlots in Arkansas violate state regulations. Pork industry officials claimed that few of violations are major and are largely minor paperwork errors. However, the new study found that only 32% of violations are for minor infractions. The study also found that of the 345 violations documented by the state, only two facilities were fined.
Interestingly, differences were found in the rate of infractions, depending on the contracting corporation. Producers for Cargill have the worst compliance record in the state with an 80% violation rate. Tyson contract producers had a 65.5% violation rate. Independent producers who do not contract with any single corporation have the best compliance record, with just a 19% violation rate. 
Manure run-off has been attributed to several recent fish kills across the country. In southern Minnesota, a Mower County farm has been blamed for the death of at least 100,000 crayfish, minnows, and suckers. The farmer had applied 130,000 gallons of manure to a 10-acre pea field and rain washed the manure into a tributary of the Root River.
In Kendall County, Illinois, discharge from a cattle farm killed every fish in a four-mile stretch of Little Indian Creek. Over 100,000 fish from at least 27 different species, as well as a huge number of freshwater mussels, were killed.
Meanwhile in North Carolina, Hurricane Bonnie has caused thousands of fish to suffocate due to overflows of sewage and animal waste into streams and rivers. nearly 10,000 dead fish were spotted along a section of the Northeast Cape Fear River, where dissolved oxygen levels dropped to almost zero. State water quality officials documented fish kills in at least three other rivers. Malfunctioning wastewater treatment plants contributed to the overflow problem.
 The Sierra Club Newsletter Online is brought to you by the Maryland Chapter of the Sierra Club.
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