B.S.: R.I.P. 3/16/08
Long-time readers of this blog surely recall my post on Bear Stearns last summer in which, amongst other things, I mused aloud when the next shoe was going to drop for the 85 year-old Wall Street firm. After all, it had just reported massive losses attributable to mortgage-backed securities (as has every major financial institution subsequently) and two of its hedge funds were forced to shutter. What made Bear different from the rest was its even-risky-for-Wall Street swashbuckling aggressiveness and its very "ungentile" attitude toward its colleagues behind closed doors. Bear Stearns was decidedly an outsider in an insider industry and it liked it that way. 
Well, this weekend, thanks to the help of the Fed and J.P. Morgan, we can no longer enjoy the latest B.S. from Bear Stearns, as it was effectively forced into the safe bosom of "Papa Bear" Morgan for an embarrassingly infinitesimal sum of $236MM after it could not untangle itself from its complex web of liabilities, losses, and hedge fund cients. It was a fire sale as has never before been seen by one of Wall Street’s very own- who are more accustomed to manufacturing said restructurings than playing a starring role.
Looking at its stock performance over the past week (down over 90%), it is a strong reality to check to financial institutions, the markets, and all of us individual investors that events can happen quickly and you have better be paying attention to your balance sheet.
Clearly there are many smart employees and shareholders of Bear Stearns who were hurt by these happenings. I feel terribly for them. This is this decade’s financial crisis (don’t worry, there will be one within the next 10 years, I promise you) and I am saddened to think how quickly a few reckless people’s risky moves can adversely effect so many.
No more B.S. R.I.P.
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Posted by: Steve Carpenter
March 19th, 2008 at 7:23 am
Was that a Freudian slip, using the world “ungentile” to describe Bear’s dealings with others behind closed doors?
Did you actually mean “ungenteel”?
Whereas, of course:
gen·teel [jen-teel] –adjective
1. belonging or suited to polite society.
2. well-bred or refined; polite; elegant; stylish.
3. affectedly or pretentiously polite, delicate, etc
and…
gen·tile [jen-tahyl] -adjective
1. of or pertaining to any people not Jewish.
2. Christian, as distinguished from Jewish.
Oh, and the private wealth management guys at Bear (the kind who sites like Cake are designed to augment if not replace)? They’re all getting 2X annual production signing bonuses (that average ~$2 million) from guys like UBS, Morgan Stanley, etc…
So don’t shed a tear for that particular end of their business.
March 19th, 2008 at 10:53 am
Um, yes, J.A.G. my misuse of “genteel” was my improper public schooling on display. I was not intending to bring religion into the Bear Stearns debate. Shalom alechem.
Now, on the employee side, you are correct that many of Bear’s executives and traders who grossly overcompensated. I don’t cry for those folks. But don’t forget that thousands of support staff, who had been working there for years and were counting on pensions, lost everything. That is tragic. It is always the least-publicized roles at companies that experience misfortune (like Enron) and have life-altering change heaped upon them.
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