Vol. 6, Issue 2, April 1, 2008
Hibernation to Blame for Bear Stearns Collapse
Markets were in an uproar this week as investigators concluded that the management of Bear Stearns was in fact sleeping on the job, leading to the unexpected collapse of the firm and forcing a $30 billion bailout by the Federal Reserve.
"Winter's usually a pretty slow time," yawned Ursula Black, Bear Stearns Chief Operating Officer. "We set things on autopilot in December and let things run themselves until March or April, depending on the weather."
Like many investment firms, Bear Stearns stockpiled cash, berries and honey every fall. However, the recent shortage of bees, combined with rising honey prices, led lower management to impulsively sell off most of this stockpile for short-term gains in January, unbeknownst to the Bear Stearns leadership.
"They're not supposed to get creative like that," growled Black, pouring another cup of coffee. "Creativity and finances do not go well together, at least according to the Federal Reserve."
The deliberate depletion of Bear Stearns' reserves might have gone unnoticed had it not been for a little-publicized but critical security breach in February, when the infamous hacker nicknamed Gold E. Loques broke into several accounts at the firm, causing substantial losses that went unnoticed for three days.
"The signs were there - we noticed that someone had sampled our porridge funds, messed with three of our seats on the NYSE, and so forth. That is apparently what set off the problems which led to our bailout," said Black. "Believe me, waking up to a federal bailout is not my idea of a good kickoff to spring."
Wall Street is holding its breath waiting for other cracks in the financial system to appear. Bear Stearns investors, however, are trying to focus on the positive, including JP Morgan's quintupling the price of its takeover bid. The embattled firm, meanwhile, is trimming back wherever it can, bracing for a lean spring.
"You've just got to look for the bare necessities," said VP Rudyard Baloo. "The simple bare necessities. Forget about your worries and your strife, at least if you've got a golden parachute prepared."
It remains unclear just what Bear Stearns' ultimate fate will be, though now that management has returned from its winter sabbatical there is some hope that something may be salvaged from the situation.
"Still, I don't want to get too optimistic," grumbled Black. "Nobody around here likes to hear the words 'Wall Street' and 'bear' in the same sentence."