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Bear Stearns And How It Got That Way

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There’s a quick piece in today’s Wall Street Journal about how Bear Stearns got to be “Wall Street’s best known bond house.” It’s all the fault of Salomon Brothers apparently. A decade or so after the firm was founded, Salim Lewis came over from Salomon and transformed Bear Stearns from an stock trading shop into “an institutional bond player.”
A common—perhaps trite—observation about Bear is that it has a “contrarian streak.” The Journal doesn’t go into details about how Bear has preserved this contrarian streak through the decades but a recent conversation with a banker who had left Bear for a larger, more diversified financial institution shed some light. (At his request we’re leaving off the name of his new employer.)
“Bear was a very entrepreneurial place,” he told us over drinks on the terrace of a tavern overlooking the Hudson river. “If you had an idea—and people thought it was a good idea—you might find yourself very quickly in front of the biggest names at Bear Stearns. More than once I found myself in front of Jimmy Cayne. At [the new place], I’ve never even come close to speaking to the top guys.”
According to our source, Bear’s entrepreneurial culture is part of what has kept it contrarian. The entrepreneurialism of it’s employees creates a entrepreneurialism on the part of the firm as a whole, allowing it to move against the grain and avoid some of the herd mentality that afflicts many Wall Street institutions.
But might the very qualities that have marked Bear as a different kind of Wall Street firm be those that have put the firm in a precarious position as the credit crunch spreads. In classical tragedy the protagonist typically gets laid low by pushing his virtues to far. Some now think Bear may be suffering a similar fate.
“Cioffi may have had a bit too much entrepreneurialism,” the source said. And at a time when most banks claim 50 cents of every dollar from global markets, Bear Stearns may now regret not following that particular herd into international diversification.
Bear Stearns Is Big in Bonds But Didn't Start Out That Way [Wall Street Journal]