In autumn 2008, Citadel seemed about as big a
threat to the global financial system as a hedge fund could
get. Ken Griffin's firm had counterparties across the financial
world and was big and highly leveraged-the three red flags of
systemic importance most often cited by regulators looking to
avoid another financial meltdown.
Citadel's tentacles extended to more of Wall Street than the
typical hedge fund, given its market making, stock loans and
administration businesses. With $20 billion under management as
of mid-2008, the firm was the 12th-largest American hedge fund.
And Citadel was purposely heavily indebted, with gross leverage
in January 2008 of 8.2 times capital.
Arguably, these reasons are what gave traction in the crisis
days to wild, unsubstantiated rumors, all denied by Citadel,
that the Federal Bureau of Investigation had been poring over
the firm's books and that the Federal Reserve was