Eventually, two centuries after its inception, the vast Terran Federation began to collapse under its own weight. To all outward appearances, the Federation was hale and healthy, expanding with vigor and vitality. But, underneath the veneer of health, a cancer of decadence was growing. A faint sneer of xenophobia was beginning to surface, an intolerance among the ruling levels of Federation government. Suddenly, the Command Staff of the Federation was dominated by humans and their oldest allies. None of the newer Federated races were represented in the government, and none of the newer Federated races could make themselves heard. Additionally, the policies of the Federation Council were becoming increasingly erratic and warlike. Then war broke out between the Federation and outlying alien races. The Federation claimed that the aliens against whom they were fighting had started the war without provocation, and were fighting a war of extermination.

In reality, these races had originally sued for peace, but were rejected by the Federation Council. Offended, these petitioners asked why. They were told that the Federation would no longer brook interference by less civilized, less advanced races. One race, an old and proud one, took this as an unforgivable insult and took to their warships. Others, also affronted by the Federation, joined the war. Years later, the sheer size of the Federation crushed the opposition, and expanded into those regions of space. The genocide of these races was hushed up with war propaganda of 'vast suicides' and 'refugee fleets' that did not exist.

Many states seceded from the Federation at once. The Chatazii, the Tren Vai and various human states banded together and formed a new, clean organization of worlds called The Galactic League. This body was founded on the basis of mutual trust and respect, and the abhorrence of war. Other states began to join, leaving the Federation rocking with political upheaval.

The new League was an affront to the Federation! These aliens had long basked in the light of the Federation, only to abandon it when they were needed the most -- such was the feeling in the highest ranks of the Federation Council. But, lacking the stability to fight back, the Federation turned away from the problem of the League, and tried, in vain, to salvage their own government.

These salvage attempts were interrupted by an ill-timed meeting with the warlike Khaa’rain, who met the Federation with immediate enmity and war. Finally, just before the Federation was completely eradicated, the League stepped in and repelled the Khaa’rain, establishing a line of demarcation over which the Khaa’rain were warned not to cross. After a single, bloody skirmish, the Khaa’rain pulled back to consider their options, a position they hold even now.

The war had cost the Federation too much of its substance, and it began to dive steeply into total collapse, their technology gone, their power in shambles. Now, the Federation is called the 'Old Terran Federation', and it is a fragmented, incoherent group of sector-states that limp along in despotism and decay, occasionally making forays into League space. They are not hated, merely pitied.