Earlier this morning we discussed the Bryan Burrough's Vanity Fair article on the downfall of Bear Stearns. Since I am simpleminded and can only focus on one thing at a time--that god damn breakfast--I thought I'd share this email that's been circulating, which parses the piece in its entirety.
I read the VF piece last night. It was written almost completely from Bear's point of view. The thesis-- and the cut line-- evil short-sellers, nervous Fed officials and dupes at CNBC brought down a shining light of American capitalism in one of the biggest financial scandals ever-- is a C-R-O-C-K of S-H-I-T. Bear Stearns was massively overleveraged, and they lost more than 10-billion of their clients' money (and at least 3 billion of their own) in those two toxic waste hedge funds that imploded last July. Half of Wall Street and much of the intelligent financial press and blogosphere concluded that Bear was dead then and there. Cultural aspects of the firm also contributed to its demise: and their unwillingness to help prop up Long Term Capital Management in 1998, when literally every other firm on the street put billions on the line, was not something the rest of them forgot.
Much of the author's "exhaustively detailed portrayal" was already exhaustively covered in the Wall Street Journal's 3-part series on Bear's demise. Some of it (the Jamie Dimon birthday dinner phone call) seems directly lifted, or at least fed to both reporters by the same source.
And the central premise: that rapacious shorts used rubes at CNBC to spread rumors that forced the company into a death spiral is backed up by exactly nothing. He throws out the names Steve Cohen (of the hedge fund SAC Capital Management) and Ken Griffin (of Citadel) at the end of the piece saying perhaps they were behind it all. He produces no evidence and not even an on-the-record statement implicating them. He tries to portray Gasparino as a tool of the shorts, but then we hear about him doggedly trying to get the company's CFO on the phone for more info. The author admits that Bear hurt itself when Maria Bartiromo got the elderly Ace Greenberg on the phone and he denied the liquidity rumors outside the chain of command. That's being a dupe? And when they finally allowed the CEO Alan Schwartz to be interviewed by David Faber, the author tries to make the case that Faber's asking Schwartz about a trader who refused a trade with Bear-- something that was true-- that this one question was the straw that broke the firm's back. So lemme get this straight: Faber should have been suspicious of a trader's motives in telling him that his/her firm was backing away from trading with a firm that was listing like the Titanic. Scandal! As if CNBC has that much sway. Every media outlet on earth was on a Bear deathwatch at the time including the WSJ. The author of the VF piece also heaps blame on Goldman and Credit Suisse. Jesus Christ the only person who WASN'T responsible for their demise is O.J. Simpson.
Bear Stearns business practices were fundamentally unsound during the credit bubble. They deserved to go out of business. They weren't "killed off by the shorts and CNBC" they killed themselves with leverage. In my opinion, "the biggest financial scandal ever" is how the Fed forced $29 billion of Bear Stearns credit risk onto the taxpayer. That's a story a serious journalist in a serious publication should cover.
Posted by guest , Jul 01, 2008 5:34PM
Who the f*** wrote this piece of garbage? Must be a WSJ staff writer who was refused employment at both VF and CNBC: "As if CNBC has that much sway"! (it does buddy), "the elderly Ace" (are we age-discriminating here?), and my personal favorite "Jesus Christ..." (a blasphemy; using the term does not make you Christian, just for the record). C'mon!
Posted by guest , Jul 01, 2008 5:45PM
Every client of Bear knew that Bear wouldn't think twice of fucking them if the firm imploded and the clients pulled the money out fast.
Posted by Anal_yst , Jul 01, 2008 5:49PM
Have we not been over the fact that the bsc credit wasn't directly thrust upon the shoulders of the tax payer?
Seriously, the fed could could cover that much with 1-year of activity.
http://en.wikipedia.org/wiki/Federal_reserve#Structure
Posted by guest , Jul 01, 2008 5:52PM
Are we sure BSC didn't have an old mortgage from OJ kicking around? Come on- That place was a magnet for sh!t.
Posted by guest , Jul 01, 2008 6:07PM
All....I said ALL the talents? you named from CNBC couldn't bring down a toothpick. Every one of them according to a CNBC spokesperson, did nothing wrong. That's their presciption for everything .... "what, Maria? she's done nothing wrong." Ahem.....end.
Posted by beentheredonethat , Jul 01, 2008 6:30PM
Mr. Guest: You seem to be alone in believing there is no taxpayer backstop to the deal......
"Bear Stearns business practices were fundamentally unsound during the credit bubble. They deserved to go out of business. They weren't "killed off by the shorts and CNBC" they killed themselves with leverage. In my opinion, "the biggest financial scandal ever" is how the Fed forced $29 billion of Bear Stearns credit risk onto the taxpayer."
Posted by guest , Jul 01, 2008 6:52PM
The dumbest mother fucker on the tube is Chuck Gasbagarumor the Wind Man - named so for the wind he breaks instead of news. "Alls he says is we brook dat story, we brook dat story" Hey asshole, you beat a press release by 10 seconds. You couldn't break a fucking window with a bulldozer.
And,despite your supposed inside scoop from croney Dick Grasso (who uses you like the insecure fool that you are), you missed the real story this afternoon. There was no mention of his suit against the NYSE. That doesn't go away (like we wish you would). What a fucking dope you are to miss such an obvious pending matter. Come on up to our trading room and we will "breaka u face".
And, for your reading pleasure, check out the posting that Spitzer put out on this moron last night at 2am from another article. ROFL. You fucking dope.
The unfortunate reality of the CNBC impact on Bear is simple- Gasbagarumor. The guy milked Jimmy Cayne for years and then turned on him like he does all of his sources. They name Russell Sherman in the Vanity Fair article. Just ask Russell or his boss Elizabeth Ventura what they think of Gasbagarumor - the dumbest human being on television. The nicest thing they will call him is snake, scumbag, liar, moron and so on. They also make a very good point. Gasbag makes stories up for his own self promotion and frequently leaves out both sides of the story for his own personal benefit. He is as stupid as he is inarticulate and every pr person in the industry refuses to deal with the thug. Ditto for their bosses. In fact, Cayne, Thain, Mack, Diamon.....Blankfein, Niederauer,Dougan,.....think he is the scum of the earth and will fire any of their people who have anything to do with him. In fact, a number of industry folks have learned that lesson the hard way. You're FIRED! Are you listening Mike Mayo????
Posted by guest , Jul 01, 2008 7:15PM
"In my opinion, 'the biggest financial scandal ever' is how the Fed forced $29 billion of Bear Stearns credit risk onto the taxpayer."
Thank you, Anal_yst, for your witty effort to correct the record.
And still the myth persists.
For the 1,000th time, the JP Morgan/Bear Stearns deal was not backed by the taxpayer. It was backed by a $29 billion loan from the Federal Reserve. The Federal Reserve does not receive taxpayer money. It is independent and self-supporting, so that it can take quick action to assist financial institutions, which might be a politically unpopular move at the time.
I'm not going into this topic any more -- take the time to inform yourself. Check out the website Anal_yst provided.
Posted by beentheredonethat , Jul 01, 2008 7:18PM
You sure you want to source Wikifuckingpedia on the FRB? REALLY? Just admit you're wrong.....
Posted by guest , Jul 01, 2008 7:27PM
The critique of the VF article was interesting. When thinking about it today, it occurred to me that the article was slanted to the Bear Stearns' point of view, and probably relied heavily on Bear Stearns' sources.
The overleveraging and the collapse of the two hedge funds in the summer of '07 probably had to a lot to do with Bear Stearns' ultimate collapse. Poor leadership at Bear, which included engendering a ton of enmity from other institutions, undoubtedly contributed a lot to the problems. But the run on the bank was a separate phenomena. A number of short sellers profited -- a lot. Whether they were canny or helped engineer the run matters, because one activity is legitimate and the other is expressly prohibited.
Posted by guest , Jul 01, 2008 7:34PM
beentheredonethat -- what's your problem? There are plenty of other sources on the subject. Go the Federal Reserve's own website if you're not satisfied. Read the archive in the New York Times. Or, actually read a book.
Are you seeking to reinvent reality?
Posted by guest , Jul 01, 2008 8:02PM
CNBC got it's highest ratings in years by fucking bear over.
If geraldo can't give away give away troop positions in afghanistan, then charlie shouldn't be able to scream bankruptcy on the air. And then he goes on the next week saying how sorry he feels for everyone, but by the way in an exclusive report, half the firm's getting fired...
The incident put the entire global financial system at risk. Sometimes you gotta just say fuck the first amendment and not report things because of the damage they could cause. Or at the very least least not run a "Bear Stearns Collapse Telethon" for a whole week.
Left to figure things out on their own; bear would have made it and lehman wouldn't be dealing with this shit right now.
Posted by guest , Jul 01, 2008 8:09PM
Did I get that right - Spitzer commented about Gasparino on a blog last night? If so, what's the link? Thx
Posted by guest , Jul 01, 2008 8:12PM
@8:02 - You're right; no one would have noticed a $2.8 B quarterly loss and we would all think Lehman was kicking ass if not for CNBC's reporting.
Posted by guest , Jul 01, 2008 8:23PM
Sounds like ES is looking for something (as opposed to someone) to do at 2 am. Gasbagarumor takes a lot of credit for breaking news here, but as the poster points out this guy is more of a wind breaker (and a ball breaker) than a news breaker. How many fucking times can one guy self promote by falsely making such claimes. Still, Elliott the bastard is getting his just rewards and Grasso must be on his fifth bottle of vino tonight and toasting every misstep his nemisis took in the last four years.
Posted by guest , Jul 01, 2008 8:44PM
what's the link to spitzer's 2am post?
Posted by guest , Jul 01, 2008 8:53PM
let's just get something straight here ... everyone on the street knows gasparino is a stupid cocksucker. if someone is a source for gasparino, then they're doing it to use him for their own benefit. even most people at cnbc think he's a prick and a joke. he always talks about seeing dick grasso, jimmy cayne, henry kravis and those folks at restaurants and events - as if any of those people would give him a second look. he's that kid in school that wants to be in the cool crowd, but is just too much of a douchbag to legitimately make the cut.
Posted by guest , Jul 01, 2008 10:27PM
the author touches on the LTCM bailout. always thought that had lingering tones in all of this. everyone that's still around participated in the LTCM bailout (Lehman too). Paulson was in that room, as was Cayne and everyone else that mattered in this whole fiasco. Bear sat on their hands. their lack of participation didn't put them in the mess they were in...but if they had participated & were in the 'club' maybe they'd still be around today.
Posted by guest , Jul 01, 2008 11:54PM
I heard that Bear broke out Spitzer's hooker scandal to buy them more time.
Posted by guest , Jul 02, 2008 8:39AM
Anal_yst give it up some (most) people do not understand the Reserve bank system and never will.
Posted by Bugs Meany , Jul 02, 2008 9:05AM
Vanity Fair is a serious publication? The most recent issue has an article, apparently not tongue-in-cheek, claiming that the political press has a "man-crush" on John McCain and is openly hostile to Barack Obama.
"Washington Post reporter Dana Milbank wryly noted the clashing contrast in hospitality accorded to McCain and Obama when they spoke before the nation’s newspaper editors in April: "The putative Republican presidential nominee was given a box of doughnuts and a standing ovation. The likely Democratic nominee was likened to a terrorist."
Only a nightly guest on "Countdown with Keith Olbermann" could say that with a straight face.
Posted by guest , Jul 02, 2008 9:17AM
The only people who hate Gasbagaro more than the Street are his fellow journos, who hate his guts and view him as backstabbing SOB. Nobody will appear on CNBC with him, unless they are on the CNBC payroll, because this windbag just can't stop talking. I don't know any journalist more hated by his peers, and for all the wrong reasons.
Posted by guest , Jul 02, 2008 9:43AM
The author's mom's punani is over levered
Posted by guest , Jul 02, 2008 10:44AM
@1/7 8:02: If a TV show can imperil the entire global financial system, the entire global financial system deserves to collapse, and we should start putting our money into physical commodities and start collecting shiny pebbles before it comes crashing down. It won't, of course, because that's just stupid.
With your facile comparison to military planning I was half expecting you to trot out the 'There are limits to freedom of speech, you don't have the right to shout 'Fire!' in a crowded cinema' cliché. Thing is, you not only can but SHOULD shout 'Fire!' if there actually IS a fire. There was a fire. Bear Stearns was overleveraged and heading for a fall.
(And while it's irrelevant, it's such a pervasive and disgusting little canard, I feel obliged to point out that the cinema thing has nothing to do with freedom of speech. If you incite a crowd to panic you get prosecuted for a breach of the peace, which has nothing to do with freedom of speech.)
Posted by guest , Jul 02, 2008 10:56AM
Bears "How ya doin?" culture killed the firm as well as their over levered arses. Im happy they are gone, black eye on the brokerage firms on the street. Im sure Lloyd was peeing his pants with happiness that day at GS headquarters, watching these pikers fold like a 5.99 lawnchair.Stick with the PSD's Ace, Ill take the Wharton grads.
Posted by Anal_yst , Jul 02, 2008 12:30PM
@ Beentheredonethat
Where have you been and what have you done? Don't trust wikipedia? Fine, take it directly from the Federal Reserve themself. See page 11 "in 2003 the Federal Reserve (after paying its own expenses) paid $22 Billion Dollars into the Treasury".
http://www.federalreserve.gov/pf/pdf/pf_1.pdf
So, to clarify, the Federal Reserve's loan can be absorbed by the Fed itself, with NO RECOURSE to any taxpayer. QED Bitch.
Posted by guest , Jul 02, 2008 1:02PM
Reading about the LTCM bailout in that book "The Smartest Guys"...I seem to recall that Bear was prime broker for LTCM and so had incredibly high clearing risk; not to be an apologist for Cayne, but he did not just sit on his hands, he offered an explanation for why they did not participate in the "loan" that was forced on the other banks by the Fed.
Posted by guest , Jul 02, 2008 10:26PM
@Anal_yst
Yeesh. If the Fed returns $22 billion to the Treasury in an average year, and if it has to eat say, $22 billion of the $29 billion of the non-recourse Bear loan, how is that not a loss borne by taxpayers? It reduces the income that would go directly to the U.S. Treasury.
Of course $29 billion is nothing compared the all that TAF TSLF PDCF EIEIO sh*t.