I cannot believe my eyes:
Bringing Down Bear Stearns (BSC): Cayne took the news peacefully. He resigned as C.E.O. on January 8, but remained chairman of the board. Schwartz was named the new C.E.O. His immediate priority was making sure Bear posted a profit in its current quarter, which ended February 29. There were still whispers out there about Bear’s financial health, many fanned by rumors of federal investigations into the hedge-fund collapse, and Schwartz badly needed some good news to report. As mortgage-related losses struck firm after firm that winter, Schwartz kept his fingers crossed, watching the calendar tick off the days until February’s end. He sweated out an entire extra day--leap day, February 29--but Bear made it. Preliminary figures showed they would report a quarterly profit of $1.10 or so a share. With luck, Schwartz said, that would end the whispers...
I do not know what is more unbelievable:
- That somebody who takes over halfway through a quarter thinks that his "immediate priority" as CEO should be to make it so that the business shows a profit that very quarter.
- That somebody who takes over halfway through a quarter thinks that he can make decisions as CEO that affect whether the business shows a profit that very quarter.
- That somebody who takes over as CEO in the middle of a financial crisis thinks that it is constructive for him to send an immediate signal that driving a wedge between actual fundamentals and reported financial results is a good business to be in.
- That any senior executive for any financial firm thinks that one-quarter financial results will materially impact market expectations of whether his organization is overleveraged--hence vulnerable to a liquidity problem.
As of the start of 2008, it was common knowledge in the circles in which I travel that Bear Stearns was the weakest and would be the first to collapse if any Wall Street institutions were to collapse. But getting Bear Stearns into a position where it was less rather than more vulnerable than, say, Lehman (LEH), does not appear to have been something Schwartz thought was his job...