Bankers involved with the controversial $1bn (pounds 600m) UBS investment say LTCM founder John Meriwether made it clear on several occasions that he did not want UBS as a shareholder. They say he only caved in last year after UBS said it did not want to take any more fees for lending and insisted on payment in shares instead.
Most of LTCM's top staff came from Wall Street and feared losing control of the business to the kind of investment banking operation from which they had sought to escape.
UBS had been involved in lending to LTCM since 1994 and was fully aware that the fund's market exposures may have been as much as 250 times its capital base.
Chairman Mathis Cabiallavetta and three UBS directors quit the bank on 2 October after owning up to $700m losses on the investment in LTCM.
Documents leaked last week confirmed that UBS had been fully aware of the risks in dealing with LTCM. Warnings from the bank's credit department that the huge borrowings LTCM carried as part of its business meant that lending to it would be a clear breach of funding guidelines were overridden.
Sources close to UBS say the overriding of risk control guidelines was not that uncommon in the old UBS before the merger with SBC earlier this year. "That was part of UBS's style, to pay more attention to clients and relationships than risk," said one source.
Other bankers who dealt with LTCM say it is wrong to claim - as some banks have sought to do - that LTCM kept them in the dark. Banks were, they say, taken through details of trades and could get a fair idea of the risk involved. One said: "If UBS knew, so did everyone else."Reuse content