Bryan Burrough, Vanity Fair, writes a stunning piece Bringing Down Bear Stearns, which details the events leading to the collapse of America's 5th largest investment bank, and its Fed-orchestrated take-out by J. P. Morgan. The article provides a gripping, insider look at the storied investment bank’s shocking collapse, ultimately raising serious questions about who’s to blame. It is also now the fodder for the financial sector naked-shorting curbs that are slated to start next week. Put it in your must read pile.
It was an uneventful morning—at first. Molinaro sat in his sixth-floor corner office, overlooking Madison Avenue, catching up on paperwork after a week-long trip visiting European investors. Then, around 11, something happened. Exactly what, no one knows to this day. But Bear’s stock began to fall. It was then, questioning his trading desks downstairs, that Molinaro first heard the rumor: Bear was having liquidity troubles, Wall Street’s way of saying the firm was running out of money. Molinaro made a face. This was crazy. There was no liquidity problem. Bear had about $18 billion in cash reserves.
Yet the whiff of gossip Molinaro heard that morning was the first tiny ripple in what within hours would grow into a tidal wave of rumor and speculation that would crash down upon Bear Stearns and, in the span of one fateful week, destroy a firm that had thrived on Wall Street since its founding, in 1923.
The fall of Bear Stearns wasn’t just another financial collapse. There has never been anything on Wall Street to compare to it: a “run” on a major investment bank, caused in large part not by a criminal indictment or some mammoth quarterly loss but by rumor and innuendo that, as best one can tell, had little basis in fact. Bear had endured more than its share of self-inflicted wounds in the previous year, but there was no reason it had to die that week in March.
To watch an interview with Bryan Burrough, author of Barbarians at the Gate, and Bringing Down Bear Stearns, Click Here