March 19, 2008
How Bear aided its own demise
My Financial Times column this week is about Bear Stearns and how it was not merely a victim of the credit crisis because its leaders brought it on themselves. You can read it here and comment below.
Sunday Jul 6 2008
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I am the FT's chief business commentator and this blog is about business, finance, media, technology and related matters. I live in New York so there is a bias towards US topics but I range more widely. Comments and criticism, which hopefully are at least as interesting as anything I write, are welcome. There is more about me on my columnist page.-
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I feel John Gapper is being rather disparaging about bridge, a game which I would recommend to anyone aspiring to enter the world of investment banking, commodity trading etc, since it gives one an excellent grounding in risk-taking. If you make a wrong decision when you are vulnerable and you get doubled and, being too self-confident, you redouble and go down a couple of tricks, you are learning a lot about risk-taking without losing your shirt. Mr Cayne MUST have understood the risks but seems to have underestimated his opponents who not only stripped him of his shirt but took his firm too.
Posted by: fh | March 19th, 2008 at 9:43 pm | Report this commentWhat is more striking is not the fall of Bear Stearns under the weight of its toxic assets but its ability to operate for more 80 years declaring profit year after year. Indeed, its executives had grown aggressive and were living in a world of delusion. The manner in which they canvassed and collected money from pension funds and mutual funds with offers of very high and assured returns may not be remembered by many now. Like a drunkard, it had to suck in more and more loans to leverage itself upwards and to keep afloat. No wonder, it developed intimate relations with hedge funds and floated some of them. It may not be forgotten that the current rot in the financial sector set in in July last when Bear Stearns closed two of them. When the seamless, rather irrational, credit flows shrank, Bear had to bust. It is not a sacrificial goat as Lilian Tit protrays it but an archetype and there are many more who have taken the same path. We really don’t know when they will be bleeding in the market. Not all Paulsons, Bernankes, Geithners and Steeles can bail them all at the same time. God save America.
Posted by: K. Subramanian | March 20th, 2008 at 8:08 am | Report this commentBridge may have collateral benefits for investment banking, just as the quant risk/reward aspects of poker may have utility for traders. As chairman of the board of a major Wall Street investment bank, Jimmy Cayne’s need to hone those skills did not outweigh his fiduciary duties to the shareholders of Bear Stearns.
As I discussed in a post a couple of days ago at http://spdiamondjr.wordpress.com/2008/03/19/march-madness-bear-and-spitzer/, Bear’s undoing came down to the hubris of Cayne and others at the top.
Posted by: SD | March 21st, 2008 at 4:57 pm | Report this commentAs I discussed in a post a couple of days ago at http://spdiamondjr.wordpress.com/2008/03/19/march-madness-bear-and-spitzer/ Bear’s undoing came down to the hubris of Cayne and others at the top.
Posted by: SD | March 21st, 2008 at 4:58 pm | Report this comment