(August 21) – “It has taken him two years to say it. But John Meriwether is finally confessing: He messed up big time — and nearly took the world’s financial system down with him,” writes Gregory Zuckerman in today’s Wall Street Journal.

“In his first wide-ranging interview since 1998’s global financial crisis — when the near collapse of Mr. Meriwether’s hedge fund Long-Term Capital Management panicked stock and bond investors world-wide — Mr. Meriwether and his partner, Eric Rosenfeld, now freely own up to many of their mistakes.”

” ‘Our whole approach was fundamentally flawed,’ Mr. Meriwether says. ‘I feel enormous remorse.’ “

“The public concession is notable. Mr. Meriwether is, after all, the cocksure bond trader once depicted in ‘Liar’s Poker,’ Michael Lewis’s best-selling book about the bawdy antics of traders at Salomon Brothers. And after his fund’s 1998 catastrophe, Mr. Meriwether initially refused to take responsibility for the mess, telling investors that the market was to blame.”

“Now, however, Mr. Meriwether, 52 years old, is humbled by a failed effort to raise $1 billion from investors for a new hedge fund; he currently manages just $375 million, according to investors.”

“To some, the crisis seems like ages ago. But in 1998, global stock and bond markets nearly seized as Long-Term Capital lost a stunning $4 billion in a matter of months, teetering on collapse, only to be rescued in a $3.6 billion bailout by a consortium of 14 Wall Street firms pulled together by the Federal Reserve. Stocks since have recovered: After plunging 14% during the worst part of the 1998 crisis, the Dow Jones Industrial Average since has surged 2,340 points, or 27%.”

“But the bond market has never fully recovered. The losses stemming from a Russian debt default and Long-Term Capital’s subsequent problems unnerved Wall Street firms, many of which continue to be wary of risking much capital on trades.”

“The result: It’s much more difficult to trade easily without moving markets. Says Jeff Vanderbeek, Lehman Brothers’ bond chief: ‘There has not been anywhere near the liquidity snapback that people would have thought.’ “