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If Bear Stearns Knew What Was Good For It, It Would've Stayed On The Wrong Side Of The Tracks

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383 Madison is the house that “[un]sexy” trading and handling money for clients and looking really good when things looked really bad for Wall Street’s real players built. So why isn’t Bear Stearns busy getting permission from the city of New York to add a deck off its master bedroom, remodeling the kitchen and preparing to make neighbors jealous with a forthcoming in-ground pool? According to some catty bitches over at Fortune, because Bear got jealous of the Street’s heavy hitters*—Goldman Sachs in particular—and strayed too far from its decidedly “back office” roots. Oh yes, they went there.
When it should’ve been sticking to its tried and true “mundane business of trading, especially complicated debt securities,” a model that made Bear successful in good times, and very successful in bad times, the self-described “Spartan” of Wall Street was getting into the riskier game of hedge funds. This was a bad idea for three reasons.
The first is that no one at Bear Stearns has the slightest idea what these highly exclusive, unregulated private investment pools actually are. (To be fair, though, few do.)
The second is that when BS decided to get into the more volatile pastime, a departure from the firm’s historically conservative nature, it didn’t just say “oh, we’ll try something a little more dicey but do it the Bear Stearns way,” it said “fuck being conservative, if we’re going to play Russian Roulette why not do it blindfolded while dropping acid?” This would explain why the fund pretty much ignored/missed danger signs in the subprime mortgage market, and put together a management team that gave the impression (based on reality) that it couldn’t care less. (To play devil’s advocate for a moment, writing reviews of “Evan Almighty” really is important than keeping a watchful eye on billions of dollars.)
The third is that when James Cayne’s delusions of grandeur got the better of him, and he decided to go to head to head with Lloyd Blankfein out of petty jealousy, he didn’t realize that the Nebbishy Master of The Universe didn’t get to where he is today by taking four hour lunch breaks to play bridge tournaments and entire weeks off to cheat at golf.
Two failed hedge funds, a fired heir apparent, and a precipitously falling stock price later, BSC has seen better days. But according to Bear, its foray into big boy land will not hurt the firm’s bottom line. To the contrary, Bear Stearns is in exactly the type of environment in which it thrives, on “nimble[ness] and creativity.” It will be profitable and bonuses will not suffer. Because it just slashed 240+ jobs.
How Bear Stearns lost its way [Fortune]
*Let’s make a pact to never use that phrase or phrases like it (“big hitter” is no better) again. Deal? Deal.