Long-Term Capital Management LP, considered the greatest collection of mathematicians Wall Street could buy, received a $3.5-billion bailout from lenders after $4-billion of losses prompted the Federal Reserve to organize a rescue. The emergency investment in the Greenwich, Conn., hedge fund, founded by former Salomon Brothers Inc. trader John Meriwether, was put together by Wall Street's power elite, including Goldman, Sachs & Co. chairman Jon Corzine, Merrill Lynch & Co. chairman David Komansky, J.P. Morgan & Co. chairman Douglas Warner and New York Federal Reserve Bank president William McDonough. The unprecedented rescue of a hedge fund, an investment partnership for wealthy individuals and institutions, shows the depth of regulators' and bankers' concern about the health of financial institutions worldwide. Some analysts said Long-Term Capital was just too big to fail. "If we were in more normal times, (they) might have said let the chips fall where they may," said Chuck Hill, research director at First Call Corp. "But to have fears that things could be unraveling for the banking system domestically as well as abroad is a bit too much." Executives from 16 banks and securities firms met with Long-Term Capital in the New York Federal Reserve Bank's boardroom in New York City during the past few days as the hedge fund's net assets sank to about $500-million from $2.3-billion three weeks ago. The fund probably wouldn't have been able to make payments to creditors Thursday if it hadn't received the infusion of cash. Long-Term Capital will have more than $4-billion in net assets after the infusion. In return, it is giving up control. The lending group will appoint an oversight committee to "direct LTCM's overall strategy and the implementation of its risk-reduction objectives," a news release said. Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter & Co., Travelers Group Inc. and UBS AG will make up the committee. Other investors include Chase Manhattan Corp., Bankers Trust Corp. and J.P. Morgan. Some of the banks and securities firms are putting up as much as $300-million each. Current investors likely will see their stakes in the firm diminish to about 10 percent. The losses are "shocking," said Richard Klitzberg, who has marketed hedge funds for about 16 years. "Any time you put that many smart people in a small area, you expect good things to happen." Instead, Russia happened. Its default on some debt and the devaluation of the ruble sent markets tumbling around the world, wiping out many of Long-Term Capital's assets. "Russia caused large and dramatically increasing volatility in global markets," Meriwether said in a Sept. 2 letter to investors. While firms including Bankers Trust and Credit Suisse First Boston also lost money as a result of swings in the markets caused by Russia, Long-Term Capital's were bigger because it relied on borrowed money to increase its bets. Much of the loss came from Meriwether's specialty of bond arbitrage _ trading designed to take advantage of price discrepancies between related securities. He pioneered fixed-income arbitrage in the 1980s at Salomon where he and his proteges became the firm's most profitable traders. The 51-year-old money manager founded Long-Term Capital in 1994, after losing his job at Salomon following a 1991 U.S. Treasury bond scandal. Thailand's devaluation, South Korea's bailout and the Russian default drove bond investors worldwide into U.S. government securities. As Treasuries rallied on this flight to quality _ the 30-year Treasury bond has returned 6.4 percent since Russia's default Aug. 16 _ traders found it almost impossible to hedge the risk of owning other debt securities by selling Treasuries. The firm produced annual returns of more than 40 percent in its first years, earning billions of dollars for Meriwether's partners and customers. In August, however, the firm lost 44 percent of its net assets as bets on interest rates backfired. In his Sept. 2 letter to investors, Meriwether said 82 percent of the August losses came from arbitrage, primarily in government bonds of the Group of Seven countries. The rest came from betting securities would rise or fall.