Bear Obituaries Rolling In

Before Bear Stearns could build the headquarters at 383 Madison they had to tear down the building that stood there. It housed an old structure that was demolished, brick by brick, from the top down. Tearing down a building in mid-town Manhattan is a dicey proposition, and can be dangerous, as witnessed by the tragic collapse of a crane just a few days ago in east midtown.

My office overlooked the construction site in 1998, and I watched in wonderment as bobcats skittered across the highest floor, hauling away the debris and slowly razing the building. Of course, the final implosion of Bear was much more sudden, and violent. Like many, I am still in a bit of a daze. Everyone on Wall Street has an opinion, and the story will eventually provide a more fascinating tale than the blowup of LTCM.

Lawrence Kudlow spent a decade at Bear in two stints, and offered up his version of what went down:

I won't let my personal involvement with Bear cloud my judgment of recent events: In waiting so many years to revise its discount policies in a manner consistent with congressional legislation, the Fed is guilty of a serious policy error.

All of this kind of makes me wonder whether Bear Stearns wasn't some kind of sacrificial lamb. Did government policy makers hope to convince the public that a big Wall Street firm could indeed fail? Or wouldn't be bailed out? Listen, they were buried, not bailed out. Kudlow's Blog

I still find it remarkable that Jimmy Cayne went AWOL during the entire episode; while Lloyd Blankfein, Jamie Dimon and Dick Fuld are not exactly lining up to appear on television, they run more effective PR campaigns. Lehman's CFO Erin Callan put in a reassuring appearance with Maria Bartiromo this week, but Bear's IR effort reminded me of the Politburo in the 70's. As I said about Bear last June:

...the executives running the firm always seem to close ranks around their own. Is this the mafia or a publicly traded corporation?

Bears corporate culture failed it in the end. Telling everyone to piss off can only work for so long. Jimmy Cayne’s investor relations policy borrowed a page from Lynyrd Skynyrd, and they went down just as hard. Bear and Skynyrd were both rebels:

So, dont ask me no questions
And I wont tell you no lies
So, dont ask me about my business
And I wont tell you goodbye

I said don’t ask no stupid questions
and I wont send you away
If you want to talk fishin,
well I guess that’ll be ok

Don’t Ask Me No Questions
-Lynyrd Skynyrd

The Financial Times has come to the same conclusion:

Mr Cayne’s response to last week’s crisis, which culminated in JPMorgan taking over Bear for $2 a share and wiping out a lot of his wealth, was a fitting end to a year during which Bear executives tried insouciantly to shrug off the doubts of investors and other banks about their business. The end result was humiliation and ruin for Bear’s 14,000 employees......Before he stepped down as chief executive in January and handed the job to Alan Schwartz, Mr Cayne was lackadaisical about communicating with the outside world. He stepped out early from a call with investors in August to discuss the collapse of two of the bank’s hedge funds and did not even appear on others.

Rampant card-playing was a symptom of a bigger disorder at Bear – the bank’s inward-looking and obstreperous culture. It grew up as a scrappy bond-trading firm that did not care about how others regarded it. That culminated in Mr Cayne’s (with hindsight ironic) decision in 1998 to shun the Fed-backed attempt to save the hedge fund Long-Term Capital Management from collapse.

The truth is that Bear’s leadership was old, self-satisfied and inbred. It had become used to telling the same jokes, travelling to the same bridge tournaments and treating the rest of Wall Street with disdain. And when the going got tough, it allowed its institution to perish. FT

The Financial Times put it far more eloquently than I every could; but to be fair I was the first to question Warren Spector’s future and was the first to write about Rich Marin’s blog, which the New York Times and Dealbreaker happily capitalized on. I would not dream of writing the full details of what I knew; some stuff is better left unsaid.

I will spend part of the weekend trying to assist a few Bear folks find jobs, although with some luck they might be gainfully employed by Dimon & Co. And I will let Larry Kudlow speak for myself and others:

And for all the disappointed Bear Stearns partners out there, including the many families and friends that I know well, hold your heads up high. Better days are coming.

Peace Out, Ace.

EBAY AUCTION

Mr. Alan “Ace” Greenberg started as a clerk at Bear Stearns in 1949 and by 1978 was the CEO of the Wall Street Titan.  Known as a master card player and magician, Ace was well known for his bow ties and famous ways and rules around the office. 

In 1999, Bear Stearns celebrated Ace Greenberg’s 50th anniversary with the Firm with special prints which were hung in the hallways of Bear Stearns New York City Headquarters on Park Ave.  These prints measured approximately 2 ft X 3 ft and are glossy photos matted unto a hard black unbendable poster board.

A prime builder of one of the world’s leading investment banks.  He’s made us answer our own phones.  He’s made use reuse paper clips, rubberbands and interoffice envelopes and we’re supposed to thank him?  On his 50th anniversary what could we say to ACE Greenberg the man who’s taught us to beware of catchy phases?  In his 50 years of leadership Ace Greenberg has as taught us how to survive the bad times, and more importantly how to survive the good times....
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How Bear aided its own demise
Financial Times

Was Bear Stearns the Sacrificial Lamb?
Kudlow’s Money Politics

Rear View Mirror: Cayne Gone Fishin’
1440 Wall Street

Rear View Mirror: Quarter Ends with a Bang
1440 Wall Street

Lynyrd Skynyrd

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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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