Vanity Fair on Bear Stearns

Bringing Down Bear Stearns
By Bryan Burrough – Vanity Fair (Aug 2008)

On Monday, March 10, the rumor started: Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon the speculation created its own reality, and the race was on to keep Bear’s crisis from ravaging Wall Street. With the blow-by-blow from insiders, Bryan Burrough follows the players—Bear’s stunned executives, trigger-happy reporters at CNBC, a nervous Fed, a shadowy group of short-sellers—in what some believe was the greatest financial scandal in history.

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Previous blog posts on Bear Stearns:

Oh Boy, More on the Bear (11 Aug 2008)
Financial Truffles (20 Jun 2008)
Money & Markets – Week of 6.16.08
Kirby’s Letter to WSJ (30 May 2008)
The Next Shoe to Drop (20 May 2008)
The Most Profitable Economic Hit in History (13 May 2008)
Loaded for Bear? (12 May 2008)
A Question on Philanthropy (28 Apr 2008)

5 Comments

  1. I believe the article accuses David Faber of something he did not do.

    Bear Stearns was set up to collapse faster than you can say Larry

    Silverstein, whether there was naked short selling or not.

    Who did it?

    “killed the TSAR and his ministers. Anastasia cried in vain”
    Sympathy for the Devil….Rolling Stones

  2. John:

    Good to know. Thank you. When I read the piece, I kept wondering why they did not access your piece. Did you speak with the author?

    Catherine

  3. No! They did not contact me.

    Their story is actually a bit confusing in that Mr. Burrough speaks of the “bear attack” by short

    sellers as a cause and the spreading of rumors, false or not, as another cause.

    The FED and J.P. Morgan and Bear CEO Alan Schwartz at the Senate hearing April 4, 2008

    claimed that the cause was the rumor mongers questioning Bear’s liquidity. There was no

    mention of a bear attack as a cause. Although, there was a question by Sen. Tester to

    Chris Cox on the subject of short selling.

    They claim that these rumor mongers were able to influence Goldman, J.P. Morgan and

    perhaps Merrill and Citigroup and several hedge funds to abandon Bear Stearns all

    of a sudden. I don’t buy their story.

    Certainly there was massive short selling and put buying and that influenced the

    stock prior to the collapse. These short sellers are either lawful speculators or

    trading on inside information or shorting the stock to manipulate the price. In

    either case the effect on the market price is the same. But certainly the short

    selling did not influence the drop from 30 to 3.8 from the close Friday March 14 to the

    opening on Monday March 17, 2008 because there was no trading over the week-end.

    Burrough assumes that Bea Stearns was “killed” and did not just die. But he misdirects

    the investigation in the direction of the bear raiders and rumor mongers rather than

    J.P. Morgan and the FED and their friends.

    John Olagues

  4. I am familiar with your research on the Bear Stearns collapse and I am stunned that Burrough could go into this story with so little suspicion about JP Morgan’s involvement. I don’t know if the details he gives are true or false, but a little critical distance from the JPM version of events was certainly called for. It makes me wonder if this wasn’t a whitewashing piece from the get go–perhaps a reprise of the 1907 story?

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