Another Flawed Bear Stearns Autopsy

Bryan Burrough, author of ‘Barbarians at the Gate: The Fall of RJR Nabisco,’ tosses his 10,000 words into the Bear Stearns (BSC) meltdown pot in Vanity Fair this month, featuring a quote from an unnamed vice-chairman of an unnamed investment bank.

 

“If I had to pick the biggest financial crime ever perpetuated,” he concludes, “I would say, ‘Bear Stearns.”’

 

Well, that understandably anonymous individual definitely needs to get out more.

The story adds some new names to the unindicted co-conspirators file, naming Stevie Cohen’s SAC Capital, which “vehemently” denied the allegations, and “Jeff Dorman, who briefly served as global co-head of Bear’s prime brokerage business until resigning to take a similar position at Deutsche Bank (DB) last summer.”

 

“We heard Dorman was saying things last summer,” says a Bear executive. “At the time we reached out to Deutsche Bank and told them he better stop it.” (Asked about the allegation, a Deutsche Bank spokeswoman acknowledged that Bear had sent its executives a letter last August asking Dorman not to solicit its clients, as he had agreed upon leaving Bear. Deutsche Bank replied that he wasn’t. The exchange didn’t explicitly address what Dorman might have been saying about the firm, nor would the spokeswoman.)

 

Hmmm. But the distinguishing feature of this contribution to the pathologist’s file is its fisking of the contribution of “trigger-happy [CNBC] reporters” during the week of Mar. 10, when fleeing customers pushed Bear into the abyss. That section includes at least a dozen mentions of the word ‘rumor,’ but omits to mention that virtually all of the so-called rumors—most specifically of clients pulling assets, and counterparties refusing to deal with Bear— were, in fact, true.

 

“Everyone on Wall Street knows the joke,” says another Bear executive involved in the discussions. “At CNBC, there is simply no adult supervision.”

 

Nobody could contest that analysis but, amidst the frenzied finger-pointing, there is plenty of evidence that adult supervision was at least as conspicuously lacking at Bear Stearns. 

Bringing Down Bear Stearns
by Bryan Burrough
Vanity Fair Aug. 2008

(Forelock tugs to Felix Salmon and Dealbook.)

Earlier on NakedShorts

Great moments in death throes
May 29 2008

The last days of Bear
Apr. 1 2008

Comments

[fxtrader07:]

you have ZERO facts to challenge the Vanity story (nor the even more pronounced and really great presentation at deepcapture.com) - and you even admit it!
But still, you try to make an article out of nothing but your heavily biased opinion and grumblings. But well, no surprises here from you. After all, you regard fraudsters like gary weiss 'highly credible'.
This is, well, weird.

2008 Jul 02 07:16 AM

[Gerry Sullivan:]

The Vanity Fair narrative is much like the 3 part, in depth, article that ran in the Wall Street Journal. The WSJ article more clearly described the near death situation at Bear early in the week of March 9.

The main difference in the two articles is that the WSJ reports and VF speculates. Conspiracy theories are most always make good copy.

It is the Vanity Fair conspiracy theory that is unproven.

2008 Jul 02 09:21 AM

[.crazylegs..:]

What really happened to Bear? Well when Carlyle had problems with one of their hedge funds, Bear was the only brokerage that tried to screw them by not allowing them to unwind positions orderly. Well, Carlyle got them back by shorting their stock, spouting rumors, then issuing novation requests for some of their trades with Bear. Once people heard Bear was having issues settling a few trades, it cascaded and the run on the bank was on. This guys here is a joke.

2008 Jul 02 10:46 AM