Schwartz Takes Bullets Cayne Deserves

The witch hunt is on for a scape goat in the Bear Stearns crisis, and their CEO Alan Schwartz is at the top of the list.

His March 11th interview on CNBC seems to be the focus of investors ire; his comments were interpreted very differently across the Street. Jaded BuySiders interpret management comments differently than Main Street; I was trying to give him the benefit of the doubt, and think Alan was merely trying to calm jittery investors as the pile on gathered speed:

March 11th
Schwartz’s comments are not entirely convincing to me, but he does claim that they have an adequate cash cushion to allow them liquidity to conduct the business. Still, capital is precious in this environment, and it likely precludes them buying back stock or even paying their folks excessively.

If you plan on entering the biggest battleground on the Street, you might want to check out Alan’s interview with David Faber:

Schwartz is guilty of one thing; not rallying the troops to throw Jimmy Cayne under the bus last summer. Bear executives saw a train wreck developing, but waited too long to act, and questions about Alan Schwartz's integrity are swirling about.

I got it wrong last summer, I thought they would push out Cayne and let Spector run the ship. But they screwed up. At least Warren knew where the bodies were buried, and although Bear de-levered from approximately 44- to 1 to 30- to 1, it was not enough in the end.

The rumors about Bear picked up momentum early last week; a six-point drop in the stock and the Fed’s TSLF facility seemed to confirm them.  Dick Bove chimed in.  Peoples IM’s were lighting up. There was panic, and you can bet people got short and fanned the flames.

Schwartz looked uncomfortable in the interview with Faber. He knew he had problems, but I don’t think he ever expected the coming Tsunami. In the end he was a banker that cut a lousy deal.

The Street has been gunning for Bear for years. Their refusal to help out in ‘98 with LTCM is well known, and there are numerous other examples of them acting greedy, short term.

In the end, when they were begging for help, they were up against scared, clueless regulators, an ex-Goldman Treasury Secretary and Jamie Dimon. Game Over.

But the most incredible thing is that Henry Blodget, of all people, is now part of the debate over Alan Schwartz’s integrity.

Incredible

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March 11th Schwartz Interview with Faber

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