Bear Stearns

Type: Public Company
Address: 245 Park Avenue, New York, New York 10167, U.S.A.
Telephone: (212) 272-2000
Fax: (212) 272-8239
Web: http://www.bearstearns.com
Employees: 10,500
Sales: $8.7 billion (2001)
Stock Exchanges:New York
Ticker Symbol: BSC
Incorporated: 1985
NAIC: 523110 Investment Banking and Securities Dealing; 523120 Securities Brokerage

Bear Stearns Companies, Inc., the holding company that owns Bear, Stearns & Company, Inc., was created on October 29, 1985, as the successor to Bear Stearns & Company and Subsidiaries, a partnership organized in 1957. The partnership, in turn, was the successor to a company founded in 1923 by Joseph Bear, Robert Stearns, and Harold Mayer as an equity-trading house. Headquartered in New York, Bear Stearns today is a full service brokerage and investment banking firm focused on three core areas: capital markets, wealth management, and global clearing services. The company maintains offices in major cities all over the globe.

The original company was founded with $500,000 in capital in response to the thriving investment climate of the early 1920s. World War I, with its heavy demand for capital, had encouraged the public to enter the securities markets in mass, and the young Bear Stearns prospered in the frenzied optimism of those markets. The company began trading in government securities and soon became a leading trader in this area.

Trading fell off sharply, of course, when the New York stock market crashed in 1929. Though Bear Stearns suffered setbacks, it had accumulated enough capital to survive quite well: during this crisis it not only avoided any employee layoffs but continued to pay bonuses. As the country struggled out of the Depression, Bear Stearns entered into the bond market to promote President Franklin Roosevelt's call for renewed development of the nation's infrastructure through the New Deal.

During the period following Roosevelt's reform measures, the nation's banking system had accumulated a large amount of cash, since demand for loans was very low. At the same time, bonds were very cheap. Bear Stearns made its first substantial profits by selling large volumes of these bonds to cash-rich banks around the country.

By 1933 the firm had grown from its original seven employees to 75, had opened its first regional office in Chicago (after buying out the Chicago-based firm of Stein, Brennan), and had accumulated a capital base of $800,000. That year Salim L. "Cy" Lewis, a former runner for Salomon Brothers, was hired to direct Bear Stearns's new institutional bond trading department. Lewis, who became a partner in 1938, a managing partner in the 1950s, and then chairman, built Bear Stearns into a large, influential firm. An almost legendary character, Lewis's outspokenness and drive were what gave Bear Stearns the style that made it stand out on Wall Street for decades to come.

In 1935, Congress passed the Securities & Exchange Commission's (SEC) Public Utilities Holding Company Act, which precipitated a breakup of utility holding companies. As new securities were being issued for the formerly private companies, Bear Stearns positioned itself to take advantage of the opportunity, trading aggressively at what Lewis later called "the most ridiculous prices you ever saw in your life."

Revolutions in the freight and transportation industries beginning in the 1940s offered other opportunities. As auto transportation became more efficient and civil aviation more feasible, the once booming rail industry began to decline. Bear Stearns was quick to see an opportunity, and as most of the nation's railroads went into bankruptcy, Bear Stearns became one of the biggest arbitrators of mergers and acquisitions between railroad companies.

In 1948 Bear Stearns opened an international department, although it was not until 1955 that the firm opened its first international office, in Amsterdam. As its international business prospered, the company opened other foreign offices, in Geneva, Paris, London, Hong Kong, and Tokyo.

In the 1950s, Lewis was one of the originators of block trading which, by the 1960s, was the bread and butter of most of Wall Street. Bear Stearns, like other companies, profited nicely from this trading until May 1, 1975, when the SEC's Security Act amendments, which eliminated fixed brokerage commissions, went into effect.

Bear Stearns began expanding its retail business operations in the late 1960s, once again ahead of the trend. It opened an office in San Francisco in 1965, and between 1969 and 1973 opened offices in Los Angeles, Dallas, Atlanta, and Boston. The company was very successful at attracting and managing accounts for wealthy individuals. These accounts also laid the foundation for the company's successful margin operations. In margin trading, brokerage houses loan their clients' securities to short sellers, who match the fund with their own capital and use the entire amount to finance trade, paying interest on the amount loaned.

In 1975, when New York City was near bankruptcy, Bear Stearns proved again that it was a risk taker by investing $10 million in the city's securities. Though it came close to losing millions of dollars, the firm eventually profited greatly from the gamble.

In May 1978, Alan "Ace" Greenberg became chairman of Bear Stearns, following the death of Cy Lewis. Greenberg had joined the firm as a clerk in 1949. He moved up rapidly within the company; by 1953, at age 25, he was running the risk arbitrage desk and by 1957 he was trading for the firm. By the time he became chairman, Greenberg had earned a reputation as one of the most aggressive traders on Wall Street. Like his predecessor, Greenberg shunned long-range planning in favor of immediate returns. It soon became apparent that Greenberg's abilities equaled and perhaps surpassed those of his predecessor. From the time he took over as chairman until Bear Stearns went public in 1985, the firm's total capital went from $46 million to $517 million; in 1989, it was $1.4 billion.

Bear Stearns's willingness to take risks pushed it into the forefront of corporate takeover activity. The firm was described as a "breeding ground" for corporate takeover attempts, and as masterful at disguising takeover maneuvers. In some instances, however, Bear Stearns's aggressiveness earned it an unsavory reputation. The firm was known to wage proxy battles against its own clients, as it did in 1982 against Global Natural Resources after deciding that Global's management had undervalued its assets and could realize greater profits. In 1986, Bear Stearns developed an option agreement that essentially allowed clients to buy stock under Bear Stearns's name, a tactic that facilitated corporate takeover attempts. The Justice Department and the SEC put an end to such tactics by filing suits against several of Bear Stearns's clients for "parking" stock (all of them settled).

In October 1985, Greenberg and the firm's executive committee announced that Bear Stearns would make a public stock offering in an effort to increase the company's ability to raise capital to finance larger trades. Part of the strategy included the formation of a holding company named Bear Stearns Companies, Inc. Shortly after the initial 20 percent offering, Bear Stearns reorganized from a brokerage house into a full-service investment firm with divisions in investment banking, institutional equities, fixed income securities, individual investor services, and mortgage-related products.

The company was hit hard by the 1987 Wall Street crash, and numerous positions at Bear Stearns were eliminated. This streamlining, however, actually helped the company when the economy fired up once again and revenues from its investment banking division and its brokerage commissions began to increase substantially. By 1991, Bear Stearns had become the top equity underwriter in Latin America. By 1992, the company had successfully included capital industry, biotechnology, and machinery stocks in its ever-expanding analysis of the corporate sector.

In 1992, Bear Stearns saw earnings double to over $295 million. During the same year, the company managed more than $13 billion in initial public offerings (IPOs) for a variety of U.S. and foreign corporations. The company also had become a leader in clearing trades for other brokers and brokerages, and boasted one of the best ratios in the industry of analysts to brokers.

In 1993, James E. Cayne succeeded Alan Greenberg as CEO. As president (a title he would continue to hold), Cayne had helped to guide the company toward new opportunities for profit in investment banking and foreign markets. By contrast to Greenberg, whose executive style was known to be impulsive, even volatile at times, Cayne had found success with a more cautious approach: he was known to avoid taking big risks and often to call upon consultants to enlighten his decision-making process. Together, Cayne and Greenberg were thought to make a powerful and well-balanced team. At the time of Cayne's succession to CEO, Greenberg still retained the title of chairman as well as the final word at Bear Stearns.

In the mid-1990s, Bear Stearns continued its concerted drive to establish itself in emerging foreign markets in Asia and Latin America. Toward this end the company opened a representative office in Beijing in 1994--a diplomatic as well as pragmatic move, as the addition of the Beijing office to Bear Stearns's Hong Kong headquarters was touted as an important demonstration of respect for and commitment to China as a formidable world financial power. Bear Stearns Asia Ltd. was significantly rewarded for this commitment in 1995, when it was chosen by Guangzhou Railway Corporation to be the sole lead underwriter for its public offering, a prime assignment in the eyes of Bear Stearns's competitors in Hong Kong.

Bear Stearns became the focus of negative attention in 1997, however, when it came under investigation by the SEC for its role as a clearing broker for a smaller brokerage named A.R. Baron, which had gone bankrupt in 1996 and defrauded its customers of $75 million. Traditionally, courts had not held clearing firms accountable for losses incurred by the customers of their client firms, but in this case Bear Stearns was accused of overstepping its bounds as a clearinghouse by continuing to process trades, loan money, and extend credit to Baron in the face of mounting evidence that the firm, then in serious financial jeopardy, was manipulating stock prices and conducting unauthorized trading while raiding the accounts of its customers.

By the summer of 1999, after a two-year probe, Bear Stearns settled civil and criminal charges with the SEC and the Manhattan District Attorney, respectively, agreeing to pay a total of $42 million in fines and restitution. In the end, Bear Stearns refused to accept or deny guilt in the settlements, and made public assurances that the settlements were immaterial to the business and financial well-being of the company. Nevertheless, the scandal tainted the records of Greenberg and Cayne and adversely affected the image of the company; perhaps as a result, shares of its stock generally traded at discounted prices for the next two years.

At the beginning of the new century, with the economy weakening, Bear Stearns found itself in a precarious position. By mid-2000, amid a climate of rampant mergers and acquisitions in the securities industry, Bear Stearns's stock price was in a two-year slump; suddenly, it was one of the last independent financial services firms on Wall Street. Though the company seemed to relish its reputation as a maverick, keeping up with competitors, most of whom were merging into global mega-forces, was a challenge.

Bear Stearns moved aggressively to expand its London office, adding 100 new employees to the existing 600 in early 2000, and moved to grow its European presence, but analysts criticized Bear Stearns for having moved too late in establishing itself internationally. The company's investment banking revenues languished as a result of this weak international presence.

Speculation was intense that Bear Stearns would itself be bought out by a larger financial institution seeking to secure a position on the international playing field. In the preceding months this had been the case with Donaldson Lufkin and Jenrette, PaineWebber, J.P. Morgan, and Wasserstein Perella. Conveniently, takeover rumors served to drive up the value of Bear Stearns's stock, and by January 2001, the company's earnings reports were proving the company could still continue to prosper on its own. CEO James E. Cayne shrewdly walked the line on this issue, exuding confidence about his company's ability to go it alone, while allowing that he was, nonetheless, willing to consider buyout offers.

In June 2001, at the age of 74, Alan C. Greenberg made the long anticipated announcement that he would step down as Bear Stearns's chairman, handing over his title and the reigns of the company to CEO James E. Cayne.

After the terrorist attacks of September 11, 2001, consumer confidence was critically low, concerns about national security were critically high, and the economy appeared to be headed straight into a recession. Bear Stearns--typically the last in the securities industry to cut jobs--succumbed to the need to reduce expenses by laying off 800 bankers, about 7 percent of its workforce. Ironically, some of the cutbacks included jobs in the London office, the office the company had worked so vigorously to expand a year earlier.

Bear Stearns continued to operate on a different model than the rest of Wall Street, and this worked to the company's advantage in the early 2000s. The company had not been as competitive as some in advising on mergers and acquisitions in the late1990s, and as a result, it was one of the few firms to avoid significant losses from the industrywide downturn in this arena. Further, through maintaining its emphasis on clearing operations, honing in on the housing boom by increasing its focus on packaging and selling mortgages, and selling bonds to investors too skittish to buy stocks, Bear Stearns was the only securities firm to report a first-quarter profit increase in 2002, demonstrating its resilience and its competitive edge once again.

Principal Subsidiaries

Bear Stearns & Company, Inc.; Custodial Trust Co.; Bear Stearns Mortgage Capital Corp.; Bear Stearns Fiduciary Services, Inc.; Bear Stearns International, Ltd.; Bear Stearns Asia Ltd.; Bear Stearns S.A.; Bear Stearns, Ltd. (Japan); Bear Stearns Securities Corp.; Correspondent Clearing; Bear Stearns Home Loans Ltd.

Principal Competitors

Goldman, Sachs & Co.; Lehman Brothers; Merrill Lynch & Co., Inc.

Further Reading

Chaffin, Joshua, "Bear Stearns to Cut 800 Jobs," Financial Times, October 19, 2001, p. 34.

Henriques, Diana B., and Peter Truell, "Should a Clearinghouse Be Its Broker's Keeper?," Business Day, April 23, 1997, p. D1.

Kruger, Daniel, "The Card Player," Forbes, October 14, 2002, p. 91.

McGeehan, Patrick, "The Bond Business Keeps Bear Stearns on the Upswing, While Morgan Stanley's Earnings Fall," New York Times, June 20, 2002, p. C8.

Morgenson, Gretchen, "S.E.C. Fines a Bear Stearns Unit in Fraud Case After Long Inquiry," New York Times, August 6, 1999, p. A1.

Myerson, Allen R., "Careful Player Moves Closer to the Top at Bear Stearns," New York Times, July 14, 1993, p. D1.

"The New Bull Market in Brokerage Stocks," Fortune, July 15, 1991.

Valdmanis, Thor, "Lehman, Bear Stearns Report Solid Earnings," USA Today, January 5, 2001, p. 2B.

Westhoff, Dale, and Bruce Kramer, "Can Mortgage Refinancings Save the U.S. Economy?," Asset Securitization Report, October 15, 2001.

— Tony Jeffris

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An investment bank located in New York City that collapsed during the subprime crisis in 2008. The collapse of Bear Stearns was the result of the company's exposure to collateralized debt obligations (CDOs) and other securitized debt markets, which it had become overleveraged in. The company was subsequently sold to JP Morgan Chase at a fraction of its previous market capitalization.

Investopedia Says:
The illiquidity that Bear Stearns faced due to its exposure to securitized debt also exposed troubles at other investment banks. Many of the biggest banks were also heavily-exposed to this sort of investment. Financial portfolios heavy with toxic debt were one cause of the global financial crisis of 2008.

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Bear Stearns

Industry	Investment services
Fate	Bought by JP Morgan Chase in September 2008
Founded	1923
Defunct	2008
Headquarters	New York City, New York, USA
Key people	Alan Schwartz, former CEO James Cayne, former Chairman & CEO
Products	Financial services Investment banking Investment management
Employees	Defunct

The Bear Stearns Companies, Inc. (former NYSE ticker symbol BSC) based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession. Its main business areas, based on 2006 net revenue distributions, were capital markets (equities, fixed income, investment banking; just under 80%), wealth management (under 10%), and global clearing services (12%).

Bear Stearns was involved in securitization and issued large amounts of asset-backed securities, which in the case of mortgages were pioneered by Lewis Ranieri, "the father of mortgage securities".^[1] As investor losses mounted in those markets in 2006 and 2007, the company actually increased its exposure, especially the mortgage-backed assets that were central to the subprime mortgage crisis. In March 2008, the Federal Reserve Bank of New York provided an emergency loan to try to avert a sudden collapse of the company. The company could not be saved and was sold to JP Morgan Chase for $10 per share, a price far below its pre-crisis 52-week high of $133.20 per share, but not as low as the $2 per share originally agreed upon by Bear Stearns and JP Morgan Chase.^[2]

The collapse of the company was a prelude to the risk management meltdown of the Wall Street investment bank industry in September 2008, and the subsequent global financial crisis and recession. In January 2010, JPMorgan ceased using the Bear Stearns name.^[3]

Contents 1 Overview 2 Financials 3 Subprime mortgage hedge fund crisis 3.1 Fed bailout and sale to JPMorgan Chase 3.2 Bear Stearns Merchant Banking 3.3 Major shareholders 4 Senior Management 4.1 Managing Partners / Chief Executive Officers 5 See also 6 References 7 Further reading 8 External links

Overview

Bear Stearns' former offices at 383 Madison Avenue

Bear Stearns was founded as an equity trading house on May Day 1923 by Joseph Bear, Robert Stearns and Harold Mayer with $500,000 in capital.^[4] Internal tensions quickly arose among the three founders. The firm survived the Wall Street Crash of 1929 without laying off any employees and by 1933 opened its first branch office in Chicago.^[4] In 1955, the firm opened its first international office in Amsterdam.^[4]

In 1985, Bear Stearns became a publicly traded company.^[4] It served corporations, institutions, governments and individuals. The company's business included corporate finance, mergers and acquisitions, institutional equities, fixed income sales & risk management, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear Stearns Securities Corp., it offered global clearing services to broker dealers, prime broker clients and other professional traders, including securities lending.^[5] Bear Stearns was also known for one of the most widely read market intelligence pieces on the street, known as the "Early Look at the Market - Bear Stearns Morning View."

Bear Stearns' World Headquarters was located at 383 Madison Avenue, between East 46th Street and East 47th Street in Manhattan. The company employed more than 15,500 people worldwide. The firm was headquartered in New York City with offices in Atlanta, Boston, Chicago, Dallas, Denver, Houston, Los Angeles, Irvine, San Francisco, St. Louis, Whippany, New Jersey; and San Juan in Puerto Rico. Internationally the firm had offices in London, Beijing, Dublin, Frankfurt, Hong Kong, Lugano, Milan, São Paulo, Mumbai, Shanghai, Singapore and Tokyo.

In 2005-2007, Bear Stearns was recognized as the "Most Admired" securities firm in Fortune's "America's Most Admired Companies" survey, and second overall in the security firm section^[6]. The annual survey is a prestigious ranking of employee talent, quality of risk management and business innovation. This was the second time in three years that Bear Stearns had achieved this "top" distinction.

On March 17, 2008, JP Morgan Chase offered to acquire Bear Stearns at a price of $2 per share or $236 million. JPMorgan Chase completed its acquisition of Bear Stearns on May 30, 2008 at the renegotiated price of $10 per share. The U.S. Federal Reserve rewarded Bear Stearns' shareholders in the deal by taking responsibility for $29 billion in toxic assets in Bear Stearns' portfolio.

Financials

As of November 30, 2006, the company had total capital of approximately $66.7 billion and total assets of $350.4 billion. According to the April 2005 issue of Institutional Investor magazine, Bear Stearns was the seventh-largest securities firm in terms of total capital.

As of November 30, 2007, Bear Stearns had notional contract amounts of approximately $13.40 trillion in derivative financial instruments, of which $1.85 trillion were listed futures and option contracts. In addition, Bear Stearns was carrying more than $28 billion in 'level 3' assets on its books at the end of fiscal 2007 versus a net equity position of only $11.1 billion. This $11.1 billion supported $395 billion in assets,^[7] which means a leverage ratio of 35.5 to 1. This highly leveraged balance sheet, consisting of many illiquid and potentially worthless assets, led to the rapid diminution of investor and lender confidence, which finally evaporated as Bear was forced to call the New York Federal Reserve to stave off the looming cascade of counterparty risk which would ensue from forced liquidation.

Subprime mortgage hedge fund crisis

Main article: 2007 subprime mortgage financial crisis

See also: Subprime lending and Collateralized debt obligation

On June 22, 2007, Bear Stearns pledged a collateralized loan of up to $3.2 billion to "bail out" one of its funds, the Bear Stearns High-Grade Structured Credit Fund, while negotiating with other banks to loan money against collateral to another fund, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund. Bear Stearns had originally put up just $35 million, so they were hesitant about the bailout, however CEO James Cayne and other senior executives worried about the damage to the company's reputation.^[8][9] The funds were invested in thinly traded collateralized debt obligations (CDOs). Merrill Lynch seized $850 million worth of the underlying collateral but only was able to auction $100 million of them. The incident sparked concern of contagion as Bear Stearns might be forced to liquidate its CDOs, prompting a mark-down of similar assets in other portfolios.^[10][11] Richard A. Marin, a senior executive at Bear Stearns Asset Management responsible for the two hedge funds, was replaced on June 29 by Jeffrey B. Lane, a former Vice Chairman of rival investment bank, Lehman Brothers.^[12]

During the week of July 16, 2007, Bear Stearns disclosed that the two subprime hedge funds had lost nearly all of their value amid a rapid decline in the market for subprime mortgages.

On August 1, 2007, investors in the two funds took action against Bear Stearns and its top board and risk management managers and officers. The law firms of Jake Zamansky & Associates and Rich & Intelisano both filed arbitration claims with the National Association of Securities Dealers alleging that Bear Stearns misled investors about its exposure to the funds. This was the first legal action made against Bear Stearns, though there have been several others since then. Co-President Warren Spector was asked to resign on August 5, 2007, as a result of the collapse of two hedge funds tied to subprime mortgages that were managed by Spector. A September 21 report in the New York Times noted that Bear Stearns posted a 61 percent drop in net profits due to their hedge fund losses.^[13] With Samuel Molinaro's November 15 revelation that Bear Stearns was writing down a further $1.2 billion in mortgage-related securities and would face its first loss in 83 years, Standard & Poor's downgraded the company's credit rating from AA to A.^[14]

Matthew Tannin and Ralph R. Cioffi, both former managers of hedge funds at Bear Stearns Companies, were arrested June 19, 2008. They faced criminal charges and were found not guilty of misleading investors about the risks involved in the subprime market. Tannin and Cioffi have also been named in lawsuits brought forth by Barclays Bank, who claims they were one of the many investors misled by the executives.^[15][16]

They were also named in civil lawsuits brought in 2007 by investors, including Barclays Bank PLC, who claimed they had been misled. Barclays claimed that Bear Stearns knew that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund were worth much less than their professed values. The suit claimed that Bear Stearns managers devised "a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments." The lawsuit said Bear Stearns told Barclays that the enhanced fund was up almost 6% through June 2007 — when "in reality, the portfolio's asset values were plummeting."^[17]

Other investors in the fund included Jeffrey E. Epstein's Financial Trust Company.^[18]

Fed bailout and sale to JPMorgan Chase

On March 14, 2008, the Federal Reserve Bank of New York agreed to provide a $25 billion loan to Bear Stearns collateralized by free and clear assets from Bear Stearns in order to provide Bear Stearns the liquidity for up to 28 days that the market was refusing to provide. Apparently the Federal Reserve Bank of New York had a change of heart and told Bear Stearns that the 28 day loan was unavailable to them. The deal was then changed to where the NY FED would make a $30 billion loan to J.P. Morgan (collaterallised not by any J.P. Morgan assets but collaterallised by Bear Stearns Assets), who would buy Bear Stearns for 2 dollars per share.^[19] Two days later, on March 16, 2008, Bear Stearns signed a merger agreement with JP Morgan Chase in a stock swap worth $2 a share or less than 7 percent of Bear Stearns' market value just two days before.^[20] This sale price represented a staggering loss as its stock had traded at $172 a share as late as January 2007, and $93 a share as late as February 2008. In addition, the Federal Reserve agreed to issue a non-recourse loan of $29 billion to JP Morgan Chase,^[21] thereby assuming the risk of Bear Stearns's less liquid assets (see Maiden Lane LLC). This non-recourse loan means that the loan is collateralized by mortgage debt^[22] and that the government can not seize J.P. Morgan Chase's assets if the mortgage debt collateral becomes insufficient to repay the loan.^[22][23] Chairman of the Fed, Ben Bernanke, defended the bailout by stating that a Bear Stearns' bankruptcy would have affected the real economy^[24] and could have caused a "chaotic unwinding" of investments across the US markets.^[20]

On March 20, Securities and Exchange Commission Chairman Christopher Cox said the collapse of Bear Stearns was due to a lack of confidence, not a lack of capital. Cox noted that Bear Stearns's problems escalated when rumors spread about its liquidity crisis which in turn eroded investor confidence in the firm. "Notwithstanding that Bear Stearns continued to have high quality collateral to provide as security for borrowings, market counterparties became less willing to enter into collateralized funding arrangements with Bear Stearns," said Cox. Bear Stearns' liquidity pool started at $18.1 billion on March 10 and then plummeted to $2 billion on March 13. Ultimately market rumors about Bear Stearns' difficulties became self-fulfilling, Cox said.^[25]

On March 24, 2008, a class action lawsuit was filed on behalf of shareholders, challenging the terms of JPMorgan’s recently announced acquisition of Bear Stearns.^[26] That same day, a new agreement was reached that raised JPMorgan Chase's offer to $10 a share, up from the initial $2 offer, which meant an offer of $1.2 billion.^[27] The revised deal was aimed to quiet upset investors and any subsequent legal action brought against JP Morgan Chase as a result of the deal as well as to prevent employees, many of whose past compensation consisted of Bear Stearns stock, from leaving for other firms. The Bear Stearns bailout was seen as an extreme-case scenario, and continues to raise significant questions about Fed intervention. On April 8, 2008, Paul A. Volcker stated that the Fed has taken 'actions that extend to the very edge of its lawful and implied powers.' See his remarks at a Luncheon of the Economic Club of New York.^[28] On May 29, Bear Stearns shareholders approved the sale to JPMorgan Chase at the $10-per-share price.^[29]

An article by journalist Matt Taibbi in Rolling Stone magazine contended that naked short selling had a role in the demise of both Bear Stearns and Lehman Brothers.^[30] A study by finance researchers at the University of Oklahoma Price College of Business studied trading in financial stocks, including Bear Stearns and Lehman Brothers, and found "no evidence that stock price declines were caused by naked short selling."^[31]

Bear Stearns Merchant Banking

Main article: Bear Stearns Merchant Banking

As part of the acquisition of Bear Stearns, JPMorgan Chase acquired several private equity groups within Bear Stearns Asset Management, including:

• Bear Stearns Merchant Banking, a $4.4 billion private equity business founded in 1997. In June 2008, it was announced BSMB would spin out of J.P. Morgan^[32][33][34] and in November 2008, the firm relaunched as Irving Place Capital.^[35][36]
• Bear Growth Capital Partners, a growth capital investment group founded in 2003 with a $375 million commitment from Bear Stearns.^[37][38] J.P. Morgan hired CCMP Capital to manage the legacy fund^[39]
• Bear Stearns Private Equity Ltd., renamed J.P. Morgan Private Equity Limited (LSE: JPEL), a publicly traded private equity vehicle making fund of funds and secondary investments^[40]
• Bear Stearns Health Innoventures, a venture capital fund established to invest in early- to mid-stage health care focused companies with a focus on the biotechnology sector^[41]
• Constellation Ventures a venture capital group, founded in 1998, making investments in the media, communications, software and services sectors^[42]

Major shareholders

The largest Bear Stearns shareholders as of December 2007 were:^[43]

• Barrow Hanley Mewhinney & Strauss - 9.73%
• Joseph C. Lewis - 9.36%
• Morgan Stanley - 5.37%
• James Cayne - 4.94%
• Legg Mason Capital Management - 4.84%
• Private Capital Management - 4.49%
• Barclays Global Investors - 3.10%
• State Street 3.01%
• Vanguard Group - 2.67%
• Janus Capital Management - 2.34%
• Legg Mason Funds Management - 1.95%
• Fidelity Management- 1.93%
• Putnam Investment Management - 1.45%
• Neuberger Berman - 1.55%
• UBS - 1.54%
• Tibra Capital - 1.27%
• Celal Aglamaz - 0.85%

Senior Management

Managing Partners / Chief Executive Officers

• Salim L. Lewis 1949 - 1978
• Alan Greenberg 1978 - 1993
• James Cayne 1993 - 2008
• Alan Schwartz 2008

See also

	New York City portal
	Companies portal

• Primary dealers
• Bankruptcy of Lehman Brothers
• Lehman Brothers
• Bear Stearns Merchant Banking
• House of Cards: A Tale of Hubris and Wretched Excess on Wall Street

References

1. ^ Lowenstein, Roger The End Of Wall Street, Penguin Press 2010, pp.xvii,22 ISBN 978-1-59420-239-1
2. ^ Ross, Andrew (March 17, 2008). "JP Morgan Pays $2 a Share for Bear Stearns". The New York Times. http://www.nytimes.com/2008/03/17/business/17bear.html.  Retrieved on September 30, 2008.
3. ^ Bear Stearns Brand Finally Fades, Two Years After Collapse
4. ^ ^{a b c d} "Could Bear Stearns Do Better?". The New York Times. 2008-03-17. http://www.nytimes.com/2008/03/17/business/17dealbook-could-be21779.html. Retrieved 2008-03-17. 
5. ^ "Bear Stearns Companies, Inc.", International Directory of Company Histories, Vol. 52, St. James Press, 2003 
6. ^ "America's Most Admired Companies 2007 FORTUNE". CNN. http://money.cnn.com/magazines/fortune/mostadmired/2007/industries/industry_52.html. Retrieved 23 August 2011. 
7. ^ Boyd, Roddy (March 31, 2008). "The last days of Bear Stearns". Fortune. http://money.cnn.com/2008/03/28/magazines/fortune/boyd_bear.fortune/.  Retrieved on September 30, 2008.
8. ^ http://www.vanityfair.com/politics/features/2008/08/bear_stearns200808
9. ^ Creswell, Julie; Bajaj, Vikas (2007-06-23), "$3.2 Billion Move by Bear Stearns to Rescue Fund", New York Times, http://www.nytimes.com/2007/06/23/business/23bond.html, retrieved 2008-04-16 
10. ^ Siew, Walden; Yoon, Al (2007-06-21), "Bear Stearns CDO liquidation sparks contagion fears", Reuters, http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070621:MTFH14355_2007-06-21_17-34-09_N21364255&type=comktNews&rpc=44 ^{[dead link]}
11. ^ Pittman, Mark (2007-06-21), "Bear Stearns Fund Collapse Sends Shock Through CDOs", Bloomberg, http://www.bloomberg.com/apps/news?pid=20601087&sid=a7LCp2Acv2aw&refer=home, retrieved 2008-04-16 
12. ^ Bajaj, Vikas (2007-06-30), "Bear Stearns Shakes Up Funds Unit", New York Times, http://www.nytimes.com/2007/06/30/business/30bear.html?ref=business, retrieved 2008-04-16 
13. ^ Grynbaum, Michael M. (2007-09-21), "Bear Stearns Profit Plunges 61% on Subprime Woes", New York Times, http://www.nytimes.com/2007/09/21/business/20cnd-wall.html, retrieved 2008-09-14 
14. ^ Basar, Shanny; Ahuja, Vivek (2007-11-15), "Bear downgraded in face of first loss in 83 years", Financial News Online, http://www.efinancialnews.com/investmentbanking/content/2449185055/20755/, retrieved 2008-04-16 
15. ^ Associated Press (2008-06-19). "2 Former Bear Stearns Managers Arrested". NY Times. http://www.nytimes.com/2008/06/20/business/20bear.html?_r=1&hp&oref=slogin. Retrieved 2008-06-19. 
16. ^ Charges at Bear Stearns linked to subprime debacle By TOM HAYS, Associated Press Writer, 6/19/08.
17. ^ Ex-Bear Stearns managers arrested at their homes By Tom Hays, Associated Press, 6/19/08.
18. ^ More Bad News for Jeff Epstein? JULY 11, 2007, Dealbook, New York Times retrieved 2011 3 25
19. ^ FRONTLINE: Inside the Meltdown - You Have a Weekend to Save Yourself Retrieved Feb. 26, 2009
20. ^ ^{a b} Fed Aided Bear Stearns as Firm Faced Chapter 11, Bernanke Says. Bloomberg, April 2, 2008
21. ^ http://www.jpmorgan.com/cm/Satellite?c=JPM_Content_C&cid=1159339104093&pagename=JPM_redesign%2FJPM_Content_C%2FGeneric_Detail_Page_Template
22. ^ ^{a b} http://seekingalpha.com/article/70098-bear-stearns-bondholders-win-big
23. ^ http://hussmanfunds.com/wmc/wmc080324.htm
24. ^ "Bernanke Defends Bear Stearns Bailout". CBS News. April 3, 2008. http://www.cbsnews.com/stories/2008/04/03/business/main3991713.shtml?source=RSSattr=HOME_3991713. 
25. ^ (PDF) Chairman Cox Letter To Basel Committee In Support Of New Guidance On Liquidity Management, 2008-03-20, http://www.sec.gov/news/press/2008/2008-48_letter.pdf, retrieved 2008-04-16 
26. ^ C&T Files Complaint and Temporary Restraining Order Challenging Bear Stearns Buyout by JPMorgan, 2008-03-24, http://www.chimicles.com/bearstearns/, retrieved 2008-04-16 
27. ^ Seeking Fast Deal, JPMorgan Quintuples Bear Stearns Bid. New York Times, March 25, 2008
28. ^ Niall Ferguson: The Ascent of Money: A Financial History of The World, Chapter 6: From Empire to Chimerica; Chimerica, p. 338
29. ^ White, Ben (May 29), "Bear Stearns passes into Wall Street history", Financial Times, http://www.ft.com/cms/s/0/d42c01d2-2d8d-11dd-b92a-000077b07658.html 
30. ^ Taibbi, Matt (October 2009). "Wall Street's Naked Swindle". Rolling Stone. http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle. Retrieved 2009-10-15. 
31. ^ http://www.cfr-cologne.de/download/workingpaper/cfr-09-09.pdf
32. ^ Bear Buyout Arm Ready to Fly Solo: BSMB to Split Off In Tale of Survival; First Up: New Name. Wall Street Journal, June 5, 2008
33. ^ http://blogs.wsj.com/deals/2008/03/18/what-happens-to-bear-stearns-merchant-banking-arm/ What Happens to Bear Stearns Merchant Banking arm. Wall Street Journal: Deal Journal, March 18, 2008
34. ^ What now for Bear Stearns' PE, VC affiliates?. The Deal, March 17, 2008
35. ^ BSMB is Now Irving Place. Private Equity Professional Digest, October 29, 2008
36. ^ Bear Stearns Merchant Banking rebrands . Private Equity Online, October 28, 2008
37. ^ Bear Merchant Banking Continues To Do Deals. Reuters Buyouts, March 31, 2008
38. ^ Growth Capital Partners’ Paul Lattanzio finds gold in hidden places — and isn’t afraid to hold onto it. Dealmaker May/June 2007 , Page 62
39. ^ PE Week Wire: Tuesday, December 16, 2008. Reuters, December 16, 2008
40. ^ Bear Stearns Private Equity Limited Changes Name to J.P. Morgan Private Equity Limited. Press Release. J.P. Morgan Private Equity Limited (company website)
41. ^ Bear Stearns Health Innoventures Closes $212 Million Fund. Business Wire, April 26, 2001
42. ^ Constellation Ventures (company website)
43. ^ Wright, William (March 17, 2008). "Employees lose $5bn on Bear Stearns". Financial News. http://www.efinancialnews.com/assetmanagement/pensionfunds/content/2450071941.  Retrieved on September 30, 2008.

Further reading

• William Cohan (2010). House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.

External links

• JPMorgan Securities home page
• FRONTLINE: Inside the Meltdown Analysis- The Bear Stearns Rescue
• New York Times Timeline of Bear Stearns' history
• Bloomberg: JPMorgan Chase to Buy Bear Stearns for $240 Million

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