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Bear Stearns

Bear Stearns Companies, Inc. was a New York City-based global investment bank, securities trading, and brokerage firm founded on May 1, 1923, by Joseph Ainslie Bear, Robert B. Stearns, and Harold C. Mayer as an equity trading house with $500,000 in capital.^[1]^[2] The firm grew into one of Wall Street's major players, engaging in investment banking, trading of equities, fixed income, and derivatives, and managing hedge funds, while surviving events like the Great Depression and maintaining a reputation for aggressive trading and high leverage ratios exceeding 30:1.^[3]^[2] Its defining collapse occurred in March 2008 amid the subprime mortgage crisis, precipitated by the failure of two Bear Stearns-managed hedge funds in mid-2007 due to losses on mortgage-backed securities and collateralized debt obligations, which eroded investor confidence and depleted liquidity.^[3]^[2] By March 13, 2008, Bear Stearns faced imminent default, prompting the Federal Reserve Bank of New York to extend emergency liquidity assistance through JPMorgan Chase, culminating in the firm's acquisition by JPMorgan for $10 per share—down from a pre-crisis value of around $170—backed by a $30 billion Federal Reserve facility via Maiden Lane LLC to absorb toxic assets.^[3]^[2] This event marked the first major failure in the 2008 financial crisis, highlighting vulnerabilities from excessive leverage, inadequate risk management, and over-reliance on short-term funding in securitized mortgage markets.^[3] The acquisition integrated Bear Stearns' operations into JPMorgan, ending its independent existence and influencing subsequent regulatory reforms like the Dodd-Frank Act.^[4]

Founding and Early Development

Establishment as a Margin Firm (1923–1950s)

Bear Stearns was established on May 1, 1923, in New York City by Joseph A. Bear, Robert B. Stearns, and Harold C. Mayer, with an initial capital of $500,000, as an equity trading house focused on clearing and margin financing for stock transactions.^[5]^[1] The firm capitalized on the speculative fervor of the early 1920s stock market boom, following World War I's industrial expansion, by serving as a margin brokerage that facilitated leveraged purchases of equities for retail and institutional clients, emphasizing efficient trade execution and risk management through collateralized lending.^[5] This model positioned Bear Stearns as a niche player in the competitive Wall Street environment, where margin accounts allowed investors to borrow against securities, amplifying both gains and potential losses amid rising market volumes.^[2] The firm navigated the 1929 stock market crash and ensuing Great Depression with relative resilience, avoiding the severe liquidations that felled many contemporaries, due to its conservative approach to leverage and focus on high-quality clearing operations rather than speculative underwriting.^[2]^[5] By maintaining tight control over margin requirements and prioritizing client trade settlements, Bear Stearns preserved its capital base and client trust, emerging as a steady operator in a devastated securities industry where overextended margin calls triggered widespread failures. In 1933, it expanded regionally by opening its first branch office in Chicago, broadening its brokerage services to Midwest investors and enhancing its national clearing capabilities.^[5] Through the 1940s and into the 1950s, Bear Stearns solidified its reputation as a margin specialist amid postwar economic recovery and renewed equity market growth, handling increasing volumes of retail trades while pioneering efficiencies in block trading for larger institutional orders by the decade's end.^[6] This period saw the firm prioritize operational discipline over aggressive expansion, with its margin business generating steady commissions from trade facilitation and interest on loans, though it remained smaller than full-service investment banks like those dominated by commercial ties.^[5] The emphasis on independent brokerage insulated Bear Stearns from broader banking regulations, allowing flexibility in a recovering market, but also limited diversification until later decades.^[7]

Transition to Investment Banking (1960s–1980s)

In the 1960s, Bear Stearns shifted focus from its core clearing and margin trading operations toward retail brokerage, opening its first West Coast office in San Francisco in 1965 to serve high-net-worth individuals and institutional clients with execution services.^[5] This expansion continued with new branches in Los Angeles (1969), Dallas (1971), Atlanta (1972), and Boston (1973), positioning the firm as a pioneer in the emerging retail model amid the end of fixed commissions in 1975, which intensified competition in securities trading.^[5] Despite this growth, the firm remained primarily a trader and clearer, avoiding heavy involvement in traditional investment banking like underwriting until later decades. The 1970s marked initial forays into higher-risk activities that foreshadowed broader diversification. In 1975, Bear Stearns committed $10 million to New York City municipal bonds during the city's fiscal crisis, a contrarian bet that initially strained liquidity but yielded profits as the bonds recovered value.^[5] The firm also maintained a corporate finance group, led by executives who handled select advisory roles, though these were secondary to trading revenues.^[8] By mid-decade, capital stood at approximately $46 million, reflecting steady but conservative expansion amid market volatility. Alan "Ace" Greenberg's ascension to CEO in 1978 catalyzed the firm's pivot toward comprehensive investment banking. Greenberg, who joined in 1949 as a clerk, emphasized aggressive hiring of "poor, smart, and deeply ambitious" talent and pursued undervalued opportunities, growing capital to $517 million by 1985.^[9] Under his direction, Bear Stearns built underwriting and advisory capabilities, participating in corporate takeovers and securities offerings, such as Wedtech stock deals in the mid-1980s that raised $163 million.^[10] In 1985, the firm reorganized as Bear Stearns Companies, Inc., went public, and established dedicated divisions for investment banking, equities, and fixed income, solidifying its status as a full-service player with global clearing and capital markets expertise.^[11] This era's innovations, including option-based financing tactics, enhanced its competitive edge in mergers and leveraged transactions.^[5]

Growth and Business Operations

Expansion into Key Markets (1990s–2000s)

During the 1990s, Bear Stearns achieved substantial revenue growth through diversification into underwriting and emerging markets, with net earnings doubling to over $295 million in fiscal year 1992 amid a surge in initial public offerings, where the firm managed $13 billion in issuances for U.S. and foreign corporations.^[5] The company strategically targeted high-growth regions in Asia and Latin America, opening a representative office in Beijing in 1994 to support its existing Hong Kong operations and facilitate access to mainland Chinese deals.^[5] By 1995, Bear Stearns Asia Ltd. acted as the sole lead underwriter for the Guangzhou Railway Corporation's public offering, marking a key milestone in its Asian capital markets penetration.^[5] Domestically, Bear Stearns broadened its investment banking footprint in the late 1990s, including an expansion into merchant banking by launching dedicated funds to acquire majority stakes in undervalued or growth-stage companies, mirroring broader Wall Street trends toward principal investing.^[12] To enhance competitiveness, executives implemented incentives like stock option plans for midlevel bankers and pursued aggressive hiring in investment banking divisions during 1999–2000, despite market volatility.^[13] The firm maintained a contrarian emphasis on its core fixed-income operations, including mortgage-backed securities and bond trading, where it avoided the cost escalations that plagued rivals and capitalized on structured products even as equity-focused peers retreated.^[14] Entering the 2000s, Bear Stearns accelerated its European expansion by adding 100 employees to its London office in early 2000, bringing the total to over 700 and positioning the unit for increased fixed-income and clearing activities across the region.^[5] This built on prior international infrastructure, which by then spanned 12 offices in Europe, Asia, and South America, supporting global trading and client services. By the early 2000s, these efforts had elevated Bear Stearns to one of the world's largest investment banks, with strengths in capital markets, derivatives, and global clearing underpinning assets nearing $400 billion by mid-decade.^[2]

Core Business Lines and Innovations

Bear Stearns' core business lines centered on capital markets activities, which accounted for roughly 80% of its operations and included equities and fixed income sales, trading, research, and investment banking.^[6] The firm conducted a wide array of securities and derivatives trading, as well as clearing services, positioning it as a key player in global financial markets.^[3] As one of 20 primary dealers designated by the Federal Reserve Bank of New York, Bear Stearns participated directly in auctions of U.S. government securities and provided periodic market reports to support Treasury operations.^[15] ^[16] Complementing capital markets, Bear Stearns operated a Global Client Services division that emphasized prime brokerage, where it ranked as the world's second-largest provider, offering hedge funds and institutional clients financing, securities lending, and execution services.^[17] This unit grew rapidly in the 2000s, leveraging the firm's trading expertise to support high-volume client activities in equities and fixed income. Wealth management represented about 8% of business, serving high-net-worth individuals through advisory and brokerage services, while global clearing services comprised 12%, handling trade execution and settlement for institutional counterparties.^[6] ^[1] In investment banking, Bear Stearns frequently acted as lead or co-lead underwriter for initial public offerings and mergers and acquisitions, capitalizing on its reputation for aggressive deal-making.^[18] The firm's fixed income operations developed specialized capabilities in mortgage-related securities and structured products, contributing to its market share in bond trading amid rising demand for securitized assets in the 1990s and early 2000s.^[19] While Bear Stearns lacked pathbreaking technological or product innovations on the scale of contemporaries like Salomon Brothers' mortgage-backed securities pioneering, its operational model emphasized cost efficiency and a trading-oriented culture that prioritized high-margin activities in volatile markets, enabling leaner overhead compared to bulge-bracket peers.^[20] This approach, rooted in short-term profit focus, facilitated competitive positioning in prime brokerage and clearing but relied heavily on leverage rather than proprietary inventions.^[3]

Risk Practices and Organizational Structure

Leverage and Funding Model

Bear Stearns maintained exceptionally high leverage ratios throughout the mid-2000s, with total assets reaching approximately $395 billion against equity of about $11.1 billion by the end of fiscal year 2007, yielding a leverage multiple of roughly 36:1.^[6] This ratio, calculated as total liabilities to equity, had risen from 27.4:1 in 2003 to 32.5:1 in 2007, reflecting a strategy of amplifying returns on equity through borrowed funds amid favorable market conditions.^[21] Such leverage exposed the firm to amplified losses on asset value declines, as even modest markdowns could erode thin equity buffers rapidly. The firm's funding model centered on short-term secured borrowing, particularly through repurchase agreements (repos) in the wholesale funding markets, which provided the bulk of its operational liquidity.^[17] By early 2008, Bear Stearns relied on $70 billion to $100 billion in overnight repo financing daily, often collateralized by mortgage-backed securities and other assets, allowing it to roll over debts continuously at low costs during periods of market confidence.^[17] This approach shifted away from unsecured interbank loans toward repo-based funding, which comprised around $125 billion of its liabilities—predominantly very short-term maturities of days or even overnight—creating a structural dependence on daily refinancing from counterparties like money market funds and other institutions.^[22] This combination of high leverage and short-term funding engendered acute rollover risk, as the model mismatched long-term asset holdings (such as illiquid structured credit investments) with liabilities requiring frequent renewal, leaving minimal permanent capital or diverse funding sources to weather counterparty withdrawals.^[23] Bear Stearns' former CEO James Cayne later acknowledged that the firm's leverage had become excessively elevated, contributing to its vulnerability when repo lenders began demanding higher haircuts or refusing to extend terms amid rising doubts over collateral quality in 2007-2008.^[24]

Leadership and Governance

Bear Stearns began as a limited partnership founded on May 1, 1923, by Joseph Ainslie Bear, Robert B. Stearns, and Harold C. Mayer, establishing a governance model centered on partner accountability and shared risk exposure typical of early Wall Street firms.^[25] This structure emphasized internal promotion and loyalty, with decisions concentrated among a small cadre of partners who bore direct financial stakes in the firm's outcomes.^[26] Alan C. "Ace" Greenberg ascended to CEO in 1978 after joining as a clerk in 1949 and becoming a partner in 1958, guiding the firm through its initial public offering on October 17, 1985, which shifted governance toward public shareholder interests while preserving a partnership ethos of cost discipline and meritocracy.^[27] Under Greenberg, who served until 1993, the board enforced rigorous performance metrics, including mandatory charitable contributions from senior managing directors—4% of their gross income—and maintained a lean administrative structure that prioritized trading profitability over expansive bureaucracy.^[26] This era's governance fostered aggressive growth but sowed seeds of concentrated decision-making, with limited external checks on internal risk assumptions. James E. "Jimmy" Cayne, who joined in 1969 and rose through trading ranks, became sole president in 1987, CEO in 1993, and chairman in 2007, consolidating leadership roles that amplified executive influence over the board. Cayne's tenure, marked by expansion into mortgage-backed securities, drew scrutiny for governance lapses, including his absence from key offices during the June 2007 hedge fund crisis and the board's endorsement of leverage ratios exceeding 30:1 by fiscal year-end 2007.^[28]^[29] The board, dominated by firm veterans like Greenberg and insiders such as Frank C. Carlucci and Donald J. Harrington, convened monthly but faced allegations of inadequate independence, as evidenced by unanimous approvals of high-risk strategies without robust dissent documentation in 2007 minutes.^[30] In January 2008, amid $1.9 billion in quarterly losses, Cayne stepped down as CEO—replaced by Alan D. Schwartz, the president and CFO—yet retained the non-executive chairmanship until the March 2008 sale to JPMorgan Chase, highlighting continuity in entrenched leadership amid crisis.^[31]^[32] Post-1985 public status mandated SEC-compliant governance, including audit and compensation committees, but Bear Stearns' structure retained partner-like incentives through significant executive stock ownership—Cayne held about 5% of shares by 2007—aligning interests with short-term gains over long-term stability.^[33] Critics, including analyses of board minutes, argued this fostered moral hazard, as compensation committees approved multimillion-dollar payouts despite deteriorating risk controls, contributing to the firm's vulnerability.^[34] No major governance reforms preceded the collapse, underscoring a reliance on internal culture over formalized oversight mechanisms.^[35]

Prelude to Collapse

Subprime Mortgage Exposure

Bear Stearns expanded its subprime mortgage exposure through aggressive securitization activities in the mid-2000s, originating loans via captive lenders and underwriting mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) backed by subprime and Alt-A loans.^[17] The firm bundled these high-risk mortgages into structured products sold to investors, profiting from origination fees, underwriting spreads, and trading. In fiscal year 2006, Bear Stearns underwrote $36 billion in CDOs, including $6.3 billion explicitly backed by MBS tranches often containing subprime debt.^[17] This business line grew despite emerging signs of subprime delinquency rates climbing above 10% by late 2006, as the firm prioritized short-term revenue over long-term credit risks inherent in loans extended to borrowers with weak credit histories and high debt-to-income ratios.^[36] By the end of November 2007, Bear Stearns held approximately $46 billion in mortgages, MBS, and asset-backed securities on its balance sheet, a significant portion tied to subprime and Alt-A exposures that comprised riskier, non-prime lending segments.^[37] Of these, $17.2 billion were classified as Level 3 assets—illiquid mortgage-related holdings valued via internal models amid market illiquidity—while by February 2008, subprime and Alt-A MBS and CDOs alone totaled $26 billion.^[17] The firm's leverage ratio, which measured total assets against equity, reached nearly 38:1 by November 2007, magnifying the impact of any valuation declines in these assets; with equity around $11.8 billion in 2006, even modest losses could erode capital buffers rapidly.^[17]^[38] This concentrated exposure proved vulnerable as housing prices peaked in mid-2006 and subprime default rates surged, triggering widespread downgrades of MBS and CDOs by rating agencies. Bear Stearns recorded a $1.9 billion write-down on mortgage-related positions in November 2007, reflecting sharp asset devaluations driven by cascading foreclosures and investor flight from structured credit products.^[17] Earlier, in August 2007, the firm held $13 billion in adjustable-rate mortgages awaiting securitization, further illustrating inventory buildup amid deteriorating market conditions.^[17] The reliance on short-term repo funding for these holdings—often rolled daily—exposed Bear Stearns to rollover risks, as counterparties grew wary of collateral quality tied to subprime underperformance.^[36] Overall, subprime-related activities represented a core vulnerability, intertwining the firm's profitability with the stability of a lending market predicated on sustained home price appreciation and borrower repayment capacity.^[17]

Hedge Fund Failures (2007)

In June 2007, two hedge funds managed by Bear Stearns Asset Management (BSAM)—the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund—experienced rapid deterioration leading to their effective collapse, marking an early signal of vulnerabilities in the subprime mortgage market.^[39] The High-Grade Fund, launched in 2003 with approximately $1 billion in assets under management, primarily invested in highly rated (mostly AAA) mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), employing leverage ratios exceeding 10:1 through short-term repo financing.^[39] ^[40] The Enhanced Leverage Fund, a more aggressive offshoot started in 2006 with about $638 million in investor capital, amplified these positions with even higher leverage—up to 20-30 times equity—betting on the stability of subprime-backed tranches while using credit default swaps (CDS) to hedge tail risks.^[41] ^[39] Both funds assumed that diversification across supposedly uncorrelated assets and hedges would mitigate downturns, but this overlooked the causal linkage: widespread subprime defaults triggered correlated losses as housing prices fell and liquidity evaporated, rendering hedges ineffective due to basis risk and counterparty constraints.^[39] Losses accelerated in early 2007 amid rising subprime delinquency rates, which climbed from 13.3% in Q4 2006 to over 15% by Q1 2007, eroding the value of underlying loans bundled into the funds' holdings.^[42] By April 2007, the High-Grade Fund reported a 5.09% loss, while the Enhanced Leverage Fund suffered 13.2%, prompting initial investor redemptions and forced asset sales into a thinning market.^[43] These drawdowns exposed the funds' reliance on short-term borrowing from prime brokers like Merrill Lynch and Goldman Sachs, who began demanding higher haircuts and collateral as mark-to-market valuations plummeted.^[44] On June 7, 2007, Bear Stearns notified investors of a liquidity crisis, suspending redemptions and revealing that the funds had borrowed at least $6 billion amid mounting margin calls.^[45] Portfolio managers Ralph Cioffi and Matthew Tannin allegedly downplayed risks in communications, claiming hedges protected against further declines despite internal models showing potential wipeouts if subprime spreads widened beyond 200 basis points.^[43] Bear Stearns intervened on June 22, 2007, extending a $3.2 billion secured loan to the High-Grade Fund—collateralized against its remaining assets—to avert immediate liquidation, framing the issue as contained to the funds rather than firm-wide.^[46] ^[6] However, the Enhanced Leverage Fund received no such support, and by July 17, 2007, valuations confirmed near-total investor losses: the Enhanced Fund retained effectively zero value, while the High-Grade Fund held only about 9% of its prior worth after 91% erosion.^[41] ^[47] On August 1, 2007, both funds filed for bankruptcy protection under Chapter 11, with Bear Stearns absorbing over $1.6 billion in direct write-downs and facing lawsuits from investors alleging misrepresentation of risks.^[39] ^[48] The episode highlighted the funds' over-reliance on flawed ratings and models that failed to account for systemic liquidity shocks, as subprime correlations spiked amid broader credit tightening, ultimately foreshadowing Bear Stearns' own leverage vulnerabilities.^[39]^[44]

The 2008 Crisis and Resolution

Liquidity Run and Market Panic

In early March 2008, Bear Stearns faced intensifying rumors of liquidity strains, exacerbated by its heavy reliance on short-term repurchase agreements (repos) for funding, which constituted the bulk of its daily financing needs.^[17] On March 10, a Monday, two events accelerated the crisis: a Federal Reserve auction for its Term Securities Lending Facility revealed unusually high borrowing demand from Bear Stearns, signaling distress, while a leaked conference call discussing the firm's exposure further fueled market doubts.^[49] This triggered an immediate liquidity run, with prime brokerage clients—primarily hedge funds—beginning to withdraw funds en masse; by mid-week, these clients pulled out approximately $17 billion in assets, reducing prime brokerage balances from over $50 billion to around $12 billion in free credit by March 14.^[50] Counterparties, including major banks and money market funds that provided repo financing, rapidly curtailed exposure due to fears of Bear's solvency; for instance, Goldman Sachs halted trading with Bear as a counterparty and declined routine novation requests, while repo lenders imposed steeper haircuts on collateral and refused to roll over overnight loans, drying up billions in daily funding that Bear needed to meet margin calls and operational demands.^[50]^[51] By March 12, Bear's liquidity pool had shrunk dramatically, with the firm unable to secure routine short-term credit from peers, prompting CEO Alan Schwartz to publicly assert sufficient liquidity but revealing internal desperation in private communications.^[52] This counterparty flight resembled a classic bank run, amplified by Bear's high leverage—estimated at 33:1—and its reputation for aggressive risk-taking, which eroded trust despite $17-18 billion in cash reserves at the week's start.^[17] The market panic manifested in Bear Stearns' stock price, which plummeted from a close of $62.97 on March 10 to $33.38 by March 13, reflecting a loss of over 85% from its 52-week high near $170, as investors anticipated insolvency and bid aggressively lower.^[52] On March 14, amid reports of emergency funding pursuits, shares traded as low as $3.50 intraday before a temporary rebound, wiping out nearly all market capitalization and signaling systemic contagion fears, with broader indices like the Dow Jones Industrial Average dipping in sympathy.^[53] The run's velocity—compressing days of withdrawals into hours—highlighted vulnerabilities in shadow banking, where unsecured creditor panic could overwhelm even collateralized funding absent central bank backstops, ultimately forcing Bear to seek Federal Reserve assistance to avert immediate bankruptcy.^[50]

Federal Reserve Intervention and Sale to JPMorgan Chase

As Bear Stearns faced a rapid liquidity crisis in mid-March 2008, with counterparties refusing to extend credit and client withdrawals accelerating, the firm notified the Federal Reserve on March 13 that it lacked sufficient funding to meet obligations.^[3] On March 14, the Federal Reserve Bank of New York (FRBNY) extended $12.9 billion in emergency financing directly to Bear Stearns under Section 13(3) of the Federal Reserve Act, secured solely by $13.8 billion in Bear's assets valued at that time, providing temporary stabilization amid fears of systemic contagion.^[3]^[54] This intervention, the first use of such extraordinary authority since the Great Depression, bought Bear Stearns roughly 28 days to seek a resolution while averting an immediate disorderly failure that could exacerbate market panic.^[55] Over the March 15-16 weekend, JPMorgan Chase emerged as the sole viable bidder after other institutions declined involvement, leading to an agreement on March 16 for JPMorgan to acquire all of Bear Stearns' shares for $2 per share in cash—a valuation of approximately $236 million based on Bear's roughly 118 million outstanding shares, representing a 93% discount from its March 12 closing price.^[56]^[3] To enable the deal and quarantine Bear's most impaired assets, the FRBNY created Maiden Lane LLC on March 14 (with assets transferred post-closing), a special-purpose vehicle that purchased about $30 billion in Bear's mortgage-backed securities and related assets from the acquiring entity.^[57]^[54] Financing for Maiden Lane consisted of a $28.82 billion senior, non-recourse loan from the FRBNY (secured only by the portfolio's cash flows and repayable over 10 years at the primary credit rate plus 100 basis points) and a $1.18 billion subordinated loan from JPMorgan, which absorbed the first $1.18 billion of losses while the Fed bore subsequent downside risk on the assets.^[58]^[3] Shareholder resistance to the initial $2 per share terms prompted amendments announced on March 24, raising the offer to $10 per share (totaling about $1.2 billion) and adjusting JPMorgan's loss-sharing on Maiden Lane to cover the first 10% of declines beyond its subordinated stake.^[59]^[55] The transaction received regulatory approvals from the Board of Governors, the Office of the Comptroller of the Currency, and the SEC, with Bear Stearns shareholders approving it on May 29, 2008.^[56] The acquisition closed effective May 30, 2008, integrating Bear's operations into JPMorgan while isolating the subsidized assets in Maiden Lane, which ultimately generated a $2.5 billion net gain for the Fed upon full wind-down in 2018 after repayments exceeded principal.^[60]^[61] This resolution underscored the Fed's role in mitigating immediate systemic threats but drew scrutiny for effectively transferring risk from private failure to public backstop.^[54]

Controversies and Critiques

Excessive Risk-Taking and Internal Failures

Bear Stearns maintained a business model characterized by aggressive risk-taking, exemplified by its leverage ratio reaching 38:1 by November 2007, which exposed the firm to amplified losses from even modest declines in asset values.^[17] This high leverage stemmed from heavy investments in illiquid mortgage-related assets, including underwriting $36 billion in collateralized debt obligations (CDOs) in 2006 and holding $13 billion in adjustable-rate mortgages by August 2007.^[17] The firm's reliance on short-term funding, borrowing $50–$70 billion overnight through repurchase agreements (repos), further compounded vulnerabilities, as these markets funded long-term, hard-to-sell positions without adequate buffers.^[17]^[62] Internal risk management at Bear Stearns was structurally deficient, described as infrequent, ad hoc, and understaffed, with risk officers lacking independence from profit-driven traders.^[17] The SEC identified numerous shortcomings in mortgage risk oversight by 2007, including inadequate stress testing and contingency planning for liquidity shortfalls.^[17] Compensation structures exacerbated these issues, rewarding short-term gains and distributing over $1.4 billion to top executives from 2000 to 2008, despite emerging losses as early as May 2006 from mortgage defaults.^[17] Practices such as "window dressing"—temporarily reducing reported leverage at quarter-ends—obscured true risk exposure from regulators and investors.^[17] The 2007 collapse of Bear Stearns' hedge funds illustrated these failures at a micro level, where managers committed three critical errors: mispredicting subprime market downturns, overleveraging positions in CDOs and credit default swaps, and maintaining insufficient liquidity to meet redemption demands, forcing distressed asset sales.^[39] These funds, seeded with firm capital, amplified firm-wide risks through unhedged exposures, yet internal models failed to account for correlated defaults or macroeconomic shifts.^[39] Leadership and governance compounded the problems, with CEO James Cayne later conceding that leverage had been excessively high, while his focus on personal pursuits like bridge and golf drew criticism for diverting attention from mounting threats.^[24]^[17] The board received a "D" rating for governance risk, and despite internal warnings—such as a February 2008 Oliver Wyman report and prior SEC critiques—Bear continued aggressive mortgage strategies, including the February 2007 acquisition of subprime lender Encore Credit.^[17] By March 2008, liquidity plummeted from $18 billion to $2 billion in days as counterparties withdrew, revealing the causal chain from unchecked internal appetites to systemic fragility.^[17]^[62]

Bailout Debates: Moral Hazard versus Systemic Protection

The Federal Reserve's facilitation of Bear Stearns' acquisition by JPMorgan Chase on March 16, 2008, involved a $29 billion non-recourse loan to a special-purpose vehicle backed by Bear's illiquid assets, with JPMorgan assuming the first $1.2 billion in losses, prompting intense debate over moral hazard risks versus the imperative to avert systemic collapse.^[3] Critics argued that the intervention exemplified moral hazard by shielding creditors and shareholders from the consequences of excessive leverage and poor risk management, thereby incentivizing future recklessness across the financial sector; for instance, the deal's terms effectively socialized losses on subprime-related assets while privatizing any upside for JPMorgan, signaling to markets that large institutions could rely on implicit government guarantees.^[63] ^[64] This perspective held that without such rescues, market discipline—through creditor demands for higher collateral or withdrawal of funding—would enforce prudence, as evidenced by Bear's pre-crisis funding model reliant on short-term repo markets that froze due to self-inflicted opacity in asset valuations.^[65] Proponents of the bailout, including Federal Reserve Chairman Ben Bernanke, countered that Bear Stearns' interconnections posed an acute threat to systemic stability, given its role as a major counterparty in derivatives and repurchase agreements; its abrupt failure risked a "sharp unwinding" of positions, exacerbating the credit freeze and potentially triggering failures at other broker-dealers amid already fragile conditions following the 2007 hedge fund collapses.^[66] Treasury Secretary Henry Paulson emphasized that the intervention was calibrated to prevent a "wholesale dumping" of mortgage securities into a paralyzed market, preserving liquidity channels essential for broader economic function, though he later advocated for enhanced resolution authorities to mitigate future dilemmas without ad hoc loans.^[67] ^[68] Empirical assessments post-intervention suggested that while moral hazard concerns materialized in heightened expectations of support—contributing to later bailouts like AIG's—the immediate avoidance of Bear's disorderly bankruptcy likely contained contagion, as counterparties' exposures totaled over $1 trillion in notional derivatives, underscoring causal linkages between firm-specific distress and network-wide vulnerabilities.^[69] The debate highlighted tensions in regulatory philosophy: free-market advocates viewed the Fed's actions as distorting incentives and eroding capital buffers, with analyses indicating that implicit guarantees amplified leverage ratios industry-wide pre-crisis, whereas interventionists prioritized causal realism in recognizing Bear's "too interconnected to fail" status over abstract hazards, arguing that unmitigated failure would have accelerated the liquidity spiral observed in subsequent weeks.^[63] ^[70] Despite criticisms, no immediate counterparty defaults materialized post-deal, though the precedent arguably contributed to moral hazard in the lead-up to Lehman Brothers' failure six months later, where similar risks were deemed unresolvable without equity injections unavailable under prevailing legal constraints.^[66] ^[71]

Legacy and Broader Impact

Influence on Financial Reforms

The rapid demise of Bear Stearns on March 16, 2008, through its distressed acquisition by JPMorgan Chase—facilitated by a $30 billion non-recourse loan from the Federal Reserve—underscored the fragility of investment banks lacking traditional deposit bases and exposed to repo market runs, prompting scrutiny of regulatory gaps in supervising highly leveraged entities.^[3] This event highlighted how off-balance-sheet vehicles and reliance on short-term wholesale funding could amplify liquidity shocks, influencing policymakers to prioritize reforms addressing shadow banking risks and systemic interconnectedness.^[72] As the first major casualty of the unfolding crisis, Bear Stearns' failure catalyzed immediate ad hoc measures, such as the Fed's Primary Dealer Credit Facility launched on March 16, 2008, which provided collateralized loans to primary dealers and evolved into models for permanent liquidity backstops.^[73] It also fueled congressional momentum for structural changes, serving as a precursor to the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law on July 21, 2010, which explicitly drew lessons from the episode to expand federal authority over non-bank financial companies.^[74]^[75] Key Dodd-Frank provisions influenced by Bear Stearns included the creation of the Financial Stability Oversight Council (FSOC) in 2010 to identify and mitigate systemic risks, including those from investment bank-like entities, and the designation of systemically important financial institutions (SIFIs) for enhanced prudential standards such as higher capital buffers and stress testing.^[72] The Act's Title II established an orderly liquidation authority, enabling the government to resolve failing SIFIs without broad market disruption or taxpayer exposure, directly addressing the improvised rescue that had backstopped Bear Stearns' toxic assets.^[74] Additionally, it mandated the Volcker Rule to curb proprietary trading by banks, responding to Bear Stearns' aggressive risk-taking in mortgage-backed securities that exacerbated its leverage ratio exceeding 30:1.^[76] These reforms aimed to internalize the costs of excessive risk, though critics noted that pre-crisis regulatory leniency—evident in Bear Stearns maintaining capital cushions above minimums yet succumbing to a funding run—revealed enforcement shortcomings rather than solely statutory voids.^[77] Post-Dodd-Frank implementations, including the Fed's 2011 SIFI designations and Basel III liquidity coverage ratios adopted in the U.S. by 2014, reflected ongoing adaptations to the vulnerabilities Bear Stearns exemplified, such as overreliance on uncollateralized short-term borrowing.^[78]

Lessons for Market Discipline and Regulation

The collapse of Bear Stearns in March 2008 exemplified the fragility of market discipline in highly leveraged financial institutions reliant on short-term funding markets. The firm maintained leverage ratios as high as 30-to-1, funding portfolios of mortgage-backed securities primarily through overnight repurchase agreements, which exposed it to sudden withdrawals by counterparties once confidence eroded.^[79] This rapid liquidity run, triggered by revelations of subprime exposure in its hedge funds as early as June 2007, demonstrated that market participants can enforce discipline effectively but often too late and too severely, leading to fire-sale dynamics rather than orderly price adjustments.^[80] Pre-crisis complacency stemmed from opaque risk assessments and underestimation of correlated exposures across institutions, undermining the purported self-correcting mechanisms of free markets in opaque derivatives and securitized products.^[81] Regulatory shortcomings amplified these market failures, as investment banks like Bear Stearns operated outside the stringent liquidity and capital rules applied to commercial banks, with the SEC's oversight focused narrowly on capital adequacy rather than systemic liquidity risks.^[82] The firm's contingency planning overlooked the potential for a complete freeze in secured funding markets, a vulnerability that regulators had not stress-tested adequately despite warnings from prior episodes like the 1998 Long-Term Capital Management crisis.^[80] The Federal Reserve's emergency intervention on March 16, 2008—backstopping JPMorgan Chase's acquisition with a $29 billion non-recourse loan—averted immediate contagion but highlighted gaps in the framework for non-bank systemic institutions, prompting calls for expanded lender-of-last-resort powers.^[83] Post-crisis analyses underscored the need for enhanced prudential standards, including liquidity coverage ratios and stress testing, to complement rather than supplant market signals, as implemented in subsequent reforms like Basel III.^[84] However, the Bear Stearns resolution also fueled debates on moral hazard, where implicit guarantees against failure erode ex-ante incentives for risk management, as counterparties anticipated regulatory forbearance for interconnected firms. Empirical evidence from the episode suggests that bolstering transparency in off-balance-sheet exposures and limiting reliance on unstable wholesale funding could restore market discipline without over-reliance on discretionary bailouts, which distort pricing of systemic risk.^[79]^[81]

References

[1]
https://www.marketswiki.com/wiki/The_Bear_Stearns_Companies_Inc
[2]
Bear Stearns: Its Collapse, Bailout, Winners & Losers - Investopedia
Bear Stearns was an investment bank that collapsed during the subprime mortgage crisis in 2008. Read what happened after the Bear Stearns bailout.Missing: credible | Show results with:credible
[3]
The Fed - Bear Stearns, JPMorgan Chase, and Maiden Lane LLC
Feb 12, 2016 · On March 13, 2008, Bear Stearns notified the Federal Reserve that it expected that it would not have enough funding or liquid assets to meet its ...Missing: collapse | Show results with:collapse
[4]
10 years after the financial crisis - J.P. Morgan
That same year, the U.S. housing market went under water, J.P. Morgan acquired Bear Stearns in record time as it too faced collapse, stock markets crashed and ...
[5]
History of Bear Stearns Companies, Inc. – FundingUniverse
1923: The original company is founded by Joseph Bear, Robert Stearns, and Harold Mayer as an equity trading house. · 1933: Bear Stearns opens its first regional ...
[6]
[PDF] Case Study on BEAR STEARNS - Repository CRMS Indonesia
Since the collapse of Bear Stearns and the bankruptcy and liquidation of Lehman Brothers, the other major investment banks have converted to Bank Holding ...Missing: credible | Show results with:credible
[7]
A Brief History of Bear Stearns - NPR
Mar 17, 2008 · The investment firm began in 1923 providing financing to small companies then managing stock trades for wealthy individual clients.Missing: founded founders
[8]
Books: Bear Stearns - Edward Betts
IN THE EARLY 1970S, THEN IN HIS mid-forties, he had risen to the heights of investment banking as the head of Bear Stearns's prestigious corporate finance group ...<|separator|>
[9]
https://www.horatioalger.org/members/detail/alan-c-greenberg/
[10]
Bear Stearns Is Bullish in Its New Role : Trader Plunges Into ...
Oct 4, 1987 · It is unsurprising that Bear, Stearns & Co. would take what amounts to a trader's plunge on an otherwise unloved investment banking opportunity.
[11]
About Us - Bear Stearns Companies
The original Bear Stearns was started on May 1, 1923 as a US based Equity Trading house with a partnership between Joseph A. Bear, Robert B. Stearns and ...Missing: founded founders
[12]
A Bear Stearns Banking Fund - The New York Times
Nov 5, 1999 · In the 1990's, many Wall Street firms have expanded merchant banking, the business of buying majority stakes in young or undervalued companies ...Missing: strategy | Show results with:strategy
[13]
Distinct Culture at Bear Stearns Helps It Surmount a Grim Market
Mar 28, 2003 · For much of 1999 and 2000, Bear Stearns executives debated various ways to compete more effectively. The firm inaugurated a stock option plan ...Missing: key | Show results with:key
[14]
https://www.wsj.com/articles/SB104882171490361800
[15]
Annual report - SEC.gov
As a primary dealer, Bear Stearns bids directly on all auctions of US government securities. Additionally, Bear Stearns furnishes periodic reports of its ...
[16]
Primary Dealers - Federal Reserve Bank of New York
Bear, Stearns & Co. was deleted from the list of primary dealers as a result of their acquisition by J.P. Morgan Securities Inc. Revised List. Sep 22, 2008.
[17]
[PDF] MARCH 2008: THE FALL OF BEAR STEARNS
Mar 15, 2008 · ” He saw the collapse of Bear Stearns as threatening to freeze the tri-party repo market, leaving the short-term lenders with collateral ...Missing: history | Show results with:history
[18]
[PDF] Bear, Stearns & Co. Inc. - Missouri Secretary of State
Bear Stearns frequently served as the lead or as a co- lead underwriter in initial public offerings ("IPOs") the first public issuance of stock of a company ...Missing: core | Show results with:core
[19]
[PDF] Bear Stearns Fixed Income Overview - EliScholar
Mar 29, 2007 · This resource is brought to you for free and open access by the Yale Program on Financial Stability and.
[20]
At Bear Stearns - KKR
Bear Stearns was a trading firm with a trading mentality focused only on short-term profits. We wanted to create value in these companies and hold them longer.
[21]
[PDF] LEHMAN BROTHERS AND BEAR STEARNS: RISK ASSESSMENT ...
Leverage (total liabilities to equity) also increased significantly from 2003 to 2007: 22.69 to 29.73 for Lehman Brothers and 27.40 to 32.53 for Bear Stearns.
[22]
Bear Stearns: Gone in 60 Seconds
Dec 9, 2015 · Bear Stearns was in the business of trading and investing in long term assets that could not be sold quickly or easily, but chose to use ...Missing: core | Show results with:core
[23]
Short-Term Debt, Rollover Risk, and Financial Crises
Oct 12, 2011 · As an intrinsic part of its business, Bear Stearns relied on day-to-day, short-term financing through secured borrowing.
[24]
Bear Stearns' Cayne concedes leverage was too high - Reuters
May 5, 2010 · Angelides said by the end of 2007, Bear was leveraged 38-to-one, when measured in terms of tangible assets versus tangible common equity.
[25]
Fears That Bear Stearns's Downfall May Spread - The New York Times
Mar 17, 2008 · To some degree this trick has been a testament to the coy gamesmanship of two of its past leaders, Alan Greenberg and Mr. Cayne.<|separator|>
[26]
Alan C. Greenberg - Leadership - Harvard Business School
Of the 300 senior managing directors at Bear Stearns, all were required by Greenberg to donate 4% of their total gross income to charity. Personal. Born-Died: ...
[27]
Alan C. Greenberg, 86, Dies; Led Bear Stearns in Good Times and ...
Jul 25, 2014 · He made a market in New York City bonds during the city's financial crisis in the 1970s, traded in troubled securities others shunned, sold ...
[28]
https://www.wsj.com/articles/SB118634436359588576
[29]
https://www.wsj.com/articles/SB121193290927324603
[30]
"Bear-Stearns Board of Directors Minutes" by Henry S. Bienen ...
Bear-Stearns Board of Directors Minutes · Author/Creator. Henry S. Bienen · James E. Cayne · Carl D. Glickman · Alan C. Greenberg · Donald J. Harrington · Frank ...
[31]
Bear Stearns Announces New Leadership - The New York Times
James E. Cayne will step down as chief executive after the steepest losses in the company's history. He will be succeeded by Alan D. Schwartz.
[32]
https://www.wsj.com/articles/SB121207047572429315
[33]
The Wages of Failure: Executive Compensation at Bear Stearns and ...
This paper provides a case study of compensation at Bear Stearns and Lehman during 2000-2008 and concludes that this assumed fact is incorrect.
[34]
Executive Compensation at Bear Stearns and Lehman 2000-2008
Nov 26, 2009 · This paper provides a case study of compensation at Bear Stearns and Lehman during 2000-2008 and concludes that this assumed fact is incorrect.
[35]
[PDF] Bear Stearns Companies Inc. (The) Governance Profile
Jun 20, 2008 · Board Analyst contains information on corporate boards, individual directors, executive and director compensation, corporate ownership structure ...
[36]
[PDF] Origins of the Crisis - FDIC
Bear Stearns had substantial exposure to mortgages and mortgage products beyond the two Bear Stearns-managed hedge funds that declared bankruptcy in 2007,.Missing: founding | Show results with:founding
[37]
[PDF] Bear Stearns: Crisis and "Rescue" for a Major Provider of Mortgage ...
Mar 19, 2008 · Another concern involved the $46 billion in mortgages, mortgage-backed and asset-backed securities. (as reported on November 30, 2007) held by ...
[38]
What Happened to Bear Stearns? Who Bought It? - TheStreet
Jul 21, 2023 · Bear Stearns was actually the smallest of the top five investment banks on Wall Street, alongside the ranks of Goldman Sachs, Lehman Brothers, ...
[39]
Dissecting the Bear Stearns Hedge Fund Collapse - Investopedia
The headline-grabbing collapse of two Bear Stearns hedge funds in July 2007 offered a look into the world of hedge fund strategies and their associated risks.
[40]
Bear Stearns High-Grade Structured Credit Funds
The fund invested in bonds and securities backed in part by subprime mortgages and churned out returns of about 1 to 1.5% a month, with no drawdowns.
[41]
2 Bear Stearns Funds Are Almost Worthless - The New York Times
Jul 17, 2007 · The Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage fund reported $638 million of investor capital and gross long ...
[42]
[PDF] Bear Stearns' Subprime Bath
Jun 12, 2007 · The hedge fund got off to a good start, posting a cumulative 4.44% return over its first four months, according to a Bear Stearns investor ...
[43]
SEC Charges Two Former Bear Stearns Hedge Fund Managers ...
Jun 19, 2008 · The Securities and Exchange Commission today charged two former Bear Stearns Asset Management (BSAM) portfolio managers for fraudulently misleading investors.
[44]
[PDF] The Collapse of Bear Stearns, or: Skinny Dipping on the Street
Jan 31, 2023 · Bear Stearns collapsed due to a loss of confidence, causing a rapid drying up of liquidity, leaving it unable to carry out transactions.Missing: credible | Show results with:credible
[45]
June 2007 – Bear Stearns Hedge Funds, Enhanced Leverage and ...
Jun 6, 2017 · These hedge funds had used high leverage to invest in opaque and illiquid securities backed by toxic sub-prime mortgages. Although, it did not ...Missing: balance sheet<|control11|><|separator|>
[46]
Bear Stearns to Bail Out Hedge Fund, Says Problem 'Contained'
Jun 22, 2007 · Bear Stearns confirmed it will bail out one of its troubled hedge funds with $3.2 billion in secured loans, but the Wall Street firm sought ...
[47]
What Happened to Bear Stearns? Who Bought It?
Jul 21, 2023 · By the summer, the High-Grade Fund had lost 91% of its value, while the Enhanced Leverage Fund was completely defunct. On July 31, 2007, both ...
[48]
Bear Stearns sued over hedge fund collapse - Reuters
Aug 9, 2007 · While Bear Stearns cut its own exposure to risky subprime loans in early 2007, the hedge fund run by senior portfolio manager Ralph Cioffi ...
[49]
A Timeline of Bear Stearns' Downfall | The Motley Fool
Oct 8, 2018 · The fifth anniversary of Bear's collapse, is a brief look at the six most important dates that led to the storied bank's downfall.
[50]
[PDF] United States: Bear Stearns Emergency Liquidity Assistance, 2008
Apr 15, 2025 · Bear Stearns received a $12.9 billion loan from the FRBNY via JPMC to prevent bankruptcy, to give time to find a solution, and to preserve ...Missing: credible | Show results with:credible<|separator|>
[51]
[PDF] Don't Fear the Repo
Dec 8, 2008 · Tuesday: Goldman email stops deals with Bear as counterparty due to high risk. By the end of the day, banks refused to issue further credit.
[52]
: A dozen key dates in the demise of Bear Stearns | Reuters
Mar 17, 2008 · 7) October 5, 2007 - Prosecutors launch a criminal probe into the collapse of the two Bear Stearns hedge funds. The stock closes at $131.58. The ...
[53]
Bear Stearns collapses, sold to J.P. Morgan Chase | March 16, 2008
Jan 19, 2018 · But soon after the New York Stock Exchange opened on Friday, March 14, Bear's stock price began plummeting.
[54]
Support for Specific Institutions | Federal Reserve History
On March 13, 2008, Bear Stearns notified the Federal Reserve that it expected that it would not have enough funding or liquid assets to meet its obligations the ...
[55]
Statement on Financing Arrangement of JPMorgan Chase's ...
Mar 24, 2008 · The Federal Reserve Bank of New York (New York Fed) will provide term financing to facilitate JPMorgan Chase & Co.'s acquisition of The Bear Stearns Companies ...
[56]
JPMorgan Chase To Acquire Bear Stearns - SEC.gov
Based on the closing price of March 15, 2008, the transaction would have a value of approximately $2 per share.
[57]
Maiden Lane Transactions - Federal Reserve Bank of New York
Purpose: ML LLC was created to facilitate the merger of JP Morgan Chase & Co. (JPMC) and Bear Stearns Companies, Inc. (Bear Stearns) by purchasing approximately ...
[58]
Summary of Terms and Conditions Regarding the JPMorgan Chase ...
Mar 24, 2008 · The Federal Reserve Bank of New York ("New York Fed") has agreed to lend $29 billion in connection with the acquisition of The Bear Stearns ...
[59]
JPMorgan Chase and Bear Stearns Announce Amended ... - SEC.gov
The Federal Reserve Bank of New York's $30 billion special financing associated with the transaction has also been amended so that JPMorgan Chase will bear the ...
[60]
JPMorgan Chase Completes Bear Stearns Acquisition - SEC Filings
JPMorgan Chase & Co. (NYSE: JPM) announced today that it has completed its acquisition of The Bear Stearns Companies Inc., effective 11:59 pm EDT on May 30, ...
[61]
New York Fed Sells Remainder of Maiden Lane LLC Securities
Sep 18, 2018 · New York Fed Sells Remainder of Maiden Lane LLC Securities; Approximately $2.5 Billion Net Gain Generated for U.S. Public from the Portfolio.
[62]
[PDF] Risk Management Lessons from the Global Banking Crisis of 2008
Oct 21, 2009 · and investors. • The near-failure of Bear Stearns highlights the. “frictional” liquidity issues that arose as clients withdrew balances, ...
[63]
[PDF] THE MORAL HAZARD PARADOX OF FINANCIAL SAFETY NETS
Moral hazard plays a central role in almost every narrative of the recent financial crisis: the government's implicit guarantees led to ex- cessive risk-taking ...
[64]
Moral Hazard and Bear Stearns - The American Prospect
Apr 4, 2008 · This commitment creates an enormous moral hazard problem. Ordinarily, creditors would be very cautious dealing with investment banks of ...Missing: JPMorgan criticism
[65]
Rewarding Bad Behavior: The Bear Stearns Bailout
Mar 12, 2018 · A week later, the Primary Dealer Credit Facility held $37.0 billion of assets, of which $5.5 billion may have come from borrowers other than ...Missing: size | Show results with:size
[66]
Reducing Systemic Risk - Federal Reserve Board
Aug 22, 2008 · With financial conditions already quite fragile, the sudden, unanticipated failure of Bear Stearns would have led to a sharp unwinding of ...
[67]
Remarks by Secretary Henry M. Paulson, Jr. at The Ronald Reagan ...
Nov 20, 2008 · The Bear Stearns situation made it painfully clear that the federal government needed the authorities to wind-down a failing non-depository ...Missing: arguments | Show results with:arguments
[68]
Moral hazard tossed out as Fed saves Bear Stearns
Mar 16, 2008 · If Bear Stearns failed, for example, it would result in a wholesale dumping of mortgage securities and other assets onto a market that is frozen ...
[69]
Fed and Bear: moral hazard or greater good? | Reuters
Mar 25, 2008 · Recent moves by the Fed, culminating in Monday's revised JPMorgan-Bear Stearns terms, may have prevented other Wall Street firms from ...
[70]
[PDF] Markets, Systemic Risk, and the Subprime Mortgage Crisis
17. This, in turn, is causing market participants to avoid financial institutions, such as investment bank Bear Stearns, with large portfolios of these.
[71]
[PDF] The Federal Reserve and the Decision to Let Lehman Brothers Fail
Years later, Paulson reiterated, “Lehman was an even bigger problem than Bear Stearns because they were insolvent. There was a big capital hole,” while ...
[72]
What Is the Dodd-Frank Act? | Council on Foreign Relations
May 8, 2023 · In March 2008, the investment bank Bear Stearns became the first financial giant to collapse, ultimately selling to J.P. Morgan for $10 a ...
[73]
The Great Recession and Its Aftermath - Federal Reserve History
This expansion began in the 1990s ... In the spring of 2008, the investment bank Bear Stearns was acquired by JPMorgan Chase with the assistance of the Federal ...
[74]
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
"Taxpayers on the hook." When the federal government facilitated the sales of firms like Wachovia and Bear Stearns, lent money to firms like AIG, and bought or ...
[75]
Chapter 2: The Dodd-Frank Act and the Financial Crisis - IMF eLibrary
The near-failure of Bear Stearns, the failure of Lehman Brothers and the government rescue of AIG are often portrayed as impetuses for the Dodd-Frank provisions ...
[76]
The Dodd-Frank Act | The Heritage Foundation
The government stepped in to rescue one of these financial institutions—Bear Stearns— which seemed to establish a policy that the government would rescue all ...
[77]
The Regulatory Failure Behind the Bear Stearns Debacle
Apr 4, 2008 · chairman, in the aftermath of the collapse, “the firm had a capital cushion well above what is required to meet supervisory standards.” Even ...
[78]
Ending "Too Big to Fail" | U.S. GAO
Mar 29, 2016 · ... failure would disastrously affect the financial sector and the nation's economy. For example, if investors think a bank is “too big to fail ...
[79]
[PDF] Lessons from the Financial Crisis | Cato Institute
Less extreme: when Bear Stearns failed, it was holding a large portfolio of mortgage-backed securities (mbss) funded at 30-to-1 leverage by overnight debt. In ...
[80]
Financial Regulation and Financial Stability - Federal Reserve Board
Jul 8, 2008 · Bear Stearns's contingency planning had not envisioned a sudden loss of access to secured funding, so it did not have adequate liquidity to meet ...
[81]
[PDF] LESSONS FROM PAST AND PRESENT FINANCIAL CRISES
We analyze the financial crisis of 2007-2009 through the lens of market failures and regulatory failures. We present a case that there were four primary ...
[82]
[PDF] SYSTEMIC RISKS AND THE BEAR STEARNS CRISIS
The period leading up to the Bear Stearns crisis provides an excellent example of the inadequacy of the existing framework for regulating systemically ...Missing: growth | Show results with:growth<|separator|>
[83]
https://www.fsb.org/uploads/r_0910a.pdf
[84]
Lessons of the Crisis: The Implications for Regulatory Reform
Jan 20, 2010 · On the one hand, if authorities step in to respond to prevent failure, contagion and collapse of the broader system, that action rewards the ...