The Collapse Of Bear Stearns - 1580 Words

Jacob Bates The Collapse of Bear Stearns and What Can Be Learned Bear Stearns was started in 1923 by Joseph Bear, Robert Stearns and Harold Mayer and was initially and equity trading firm. It was one of the most respected firms of Wall Street and up until its collapse in March of 2008, had never had a losing quarter in its 85-year history. Bear Stearns had made it through the Great Depression, World War II, and multiple recessions over its long history. Alan Greenberg took over as CEO in 1978 and the culture at Bear Stearns began to change. In 1985, with Greenberg at the helm, Bear Stearns created a holding company called ‘Bear Stearns Company, Inc† and officially became an investment firm. According to fundingverse.com and William Ryback [14, 11], earnings soared and they began setting new company records for earnings. In 1993, James Cayne took over as CEO and steered Bear Stearns through the dot-com boom and the September 11th attacks. Cayne had made Bear a fortune by trading municipal bonds through the 70’s as New York was go ing through a crisis and nearly declared bankruptcy. Under Cayne’s leadership, Bear Stearns stock price rose six-fold and consistently beat earnings estimates. All was going well until around 2006. That brings us to the root cause of the collapse at Bear Stearns. Bear Stearns had begun investing in subprime mortgages through to funds. According to the investment website investopedia [7], a subprime mortgage is basically a mortgage that is given toShow MoreRelatedWilliam David Coh An American Business Writer Essay1323 Words   |  6 PagesBusiness. (Source: Wikipedia.org) House of Cards describes in particular the complicated series of events that led to the downfall of Bear Sterns in March 2008. Its actual appeal, however, deduces from its complete and careful analysis of the history of the firm since its origination as an upstart brokerage firm in 1923 and a gripping account of the demise of Bear Sterns in 2007. This failure prognosticated a lot of issues that would eventually stultify the firm, and the author puts forward thatRead Morebear stearns3426 Words   |  14 Pagesï » ¿SArajevo School of science and technology Bear Stearns Collapse 2007 A short analysis ISMAR HOTA Table of Contents Introduction 3 Literature Review 3 Methodology 4 Analysis 5 Introduction 5 About Bear Stearns 6 The Culture at Bear Stearns 6 The Collapse of Bear Sterns 7 The Ethical Issues behind the Bear Stearns Collapse 8 What are subprime mortgages and its Ethical Failures? 8 The Lack of Corporate Governance at Bear Sterns 9 Moral Hazard at Bear Stearns 10 Non Ethical Conduct of the RegulatorsRead MoreFinancial Crisis Between 2007 And 2009 Essay1331 Words   |  6 PagesFinancial Crisis between 2007 and 2009 was the worst economic crisis after the Great Depression in 1930s. This crisis was a worldwide crisis as it affected the financial system globally and led to collapse in economy. Financial intermediation is a process of banks that take funds from the depositor and lend them out to the borrower. In the financial transaction, financial intermediary acts as the middleman between two parties. Commercial bank, investment banks, pension funds are the example for financialRead MoreThe Downfall Of The Subprime Mortgage Market1716 Words   |  7 Pagesapproximately 20.03% in September 2008, whereas prime loans delinquency rate was only 4.34%. Moreover, the foreclosure rate varied from only 1.58% on prime loans to an outstanding 12.55% on subprime mortgage loans (Subprime Mortgage, 2016). Due to the collapse in the housing market, forecl osures caused an estimated $71 billion in losses at the end of 2007, as well as, another $32 billion is losses to properties neighboring the foreclosures (Li Li, 2012). Consequently, investors began to see the riskRead Morebear stearns case2031 Words   |  9 Pagesagainst any movements in the credit market (Bear Stearns and the Seeds of its Demise, 2008). The investment strategy of the High Grade Structured Credit Strategies Enhanced Master Fund was essentially the same as the one above; however, there was a greater investment into low-risk securities. Thus, increasing the amount of leverage to enable this additional investment. This investment would then create a higher return, but with limited risk (Bear Stearns and the Seeds of its Demise, 2008). 2Read MoreThe Financial Crisis Of 2007-2008 Essay2367 Words   |  10 Pagescrisis of 2007-2008, it is incredibly important to discuss the relevance of the government bailout and organized sale of Bear Stearns. There is a large amount of discussion behind whether or not Bear Stearns, a large investment based financial institution, should have been bailed out by the US government. The decision to bail out and have a government-orchestrated sale of Bear Stearns was an incredibly complicated situation to discuss and there are parts of which cannot be understood and only inferredRead MoreBear Sterns Rise and Fall4779 Words   |  20 PagesThe rise and fall of Bear Stearns Introduction Bear Stearns, the fifth largest investment bank in US, was established as an equity-trading house in 1923 by Joseph Bear, Robert Stearns, and Harold Mayer. Its headquarters was located in New York City with offices in the major US cities, South America, Europe, and Asia, employing more than 13,500 people around the world. The firm survived every major crisis like the Great Depression, World War II, the 1987 market crash, and the 9/11 terrorists attackRead MoreMoney and Banking873 Words   |  4 Pages1. Briefly explain the rise and fall of LTCM. What was the moral hazard issue the fed was worried about? How did they try and get around the moral hazard issue? What specifically was the Feds role in the bailout? What roles specifically did Bear play and not play in the LTCMs life and death? LTCM’s board of directors included many geniuses in from the financial world, who collectively created complex models allowed them to calculate risk of securities much more accurately than others. LTCM’sRead MoreInternational Financial Services : Bear Stearns2000 Words   |  8 PagesNBS-3A8Y International Financial Services Coursework: Bear Stearns Case Study 1. What role did Bear Stearns’ culture play in its positioning vis-à  -vis its competitors, and what role might that culture have played in its demise? Bear Stearns was based in New York and was one of the largest global investment bank, securities trader, and brokerage firm, it founded with $500,000 of capital in 1923(Stowell, 2010). In the early 1930’s, Bear Stearns had a history of aggressive market behaviour as evenRead MoreThe Wall Street Meltdown1627 Words   |  6 Pagesnow known as the Stock Market Crash of 2008, and have subsequently lived during the Great Recession. The beginning of the crisis is marked as the downfall of Bear Stearns Financial. The company, with a triple A rating, was sidelined with problems of lack of cash flow, and a piling up of unpaid debts on housing mortgages. Bear Stearns invested heavily in these mortgages, because they were lucrative so long as the loans were being paid off. Foreclosures did not begin to pile up until after the 2005-2006