The Bear Stearns Companies, Inc. is a New York-based global investment bank, brokerage and brokerage trading that failed in 2008 as part of the global financial crisis and recession, and then sold to JPMorgan Chase. The main business areas before the failures were the capital markets, investment banking, wealth management and global clearing services, and were deeply involved in the subprime mortgage crisis.
In the years leading up to the failures, Bear Stearns was deeply involved in securitization and issued large amounts of asset-backed securities, which in the case of a mortgage pioneered by Lewis Ranieri, "the father of mortgage securities." As investor losses increased in those markets in 2006 and 2007, the company actually increased its exposure, especially mortgage backed assets that became the center of the subprime mortgage crisis. In March 2008, the Federal Reserve Bank of New York granted an emergency loan to try to avert a sudden collapse of the company. However, the company could not be rescued and sold to JP Morgan Chase for $ 10 a share, priced well below the pre-52-week high of $ 133.20 per share, but not as low as $ 2 per share originally agreed by Bear Stearns and JP Morgan Chase.
The fall of the company was the beginning of the destruction of risk management investment banking industry in the United States and elsewhere peaking in September 2008, and the subsequent global financial crisis of 2008-2009. In January 2010, JPMorgan stopped using the Bear Stearns name.
Video Bear Stearns
Histori
Bear Stearns was founded as a home of equity trading on May Day 1923 by Joseph Ainslie Bear, Robert B. Stearns and Harold C. Mayer with a capital of $ 500,000. Internal tension quickly emerged between the three founders. The company survived Wall Street Crash in 1929 without firing employees and in 1933 opened its first branch office in Chicago. In 1955, the company opened its first international office in Amsterdam.
In 1985, Bear Stearns became a public company. It serves companies, institutions, governments, and individuals. Company business including corporate finance, mergers and acquisitions, institutional equity, fixed income & amp; risk management, trade and research, personal client services, derivatives, foreign exchange and sales and futures trading, asset management and prisoner services. Through Bear Stearns Securities Corp., the company offers global clearing services to intermediary traders, major brokerage clients and other professional traders, including securities lending. Bear Stearns is also known as one of the most read passages of street market intelligence, known as "Early Look at the Market."
Bear Stearns World Headquarters is located at 383 Madison Avenue, between East 46th Street and East 47th Street in Manhattan. In 2007, the company employed more than 15,500 people worldwide. The company is headquartered in New York City with offices in Atlanta, Boston, Chicago, Dallas, Denver, Houston, Los Angeles, Irvine, San Francisco, St. Louis; Whippany, New Jersey; and San Juan, Puerto Rico. Internationally the company has offices in London, Beijing, Dublin, Frankfurt, Hong Kong, Lugano, Milan, SÃÆ' Â £ o Paulo, Mumbai, Shanghai, Singapore and Tokyo.
In 2005-2007, Bear Stearns was recognized as the "Most Admired" securities firm in Fortune "America's Most Admired Enterprise" survey, and secondly in total in the securities firm. Annual surveys are prestigious employee rankings, quality risk management and business innovation. This is the second time in three years that Bear Stearns has achieved this "peak" difference.
Lead to failure - increase exposure to subprime mortgage
In November 2006, the company had a total capital of about $ 66.7 billion and total assets of $ 350.4 billion and according to the April 2005 issue of Institutional Investor magazine, Bear Stearns is the seventh largest securities company in terms of total capital.
A year later Bear Stearns had a notional contract amount of approximately $ 13.40 trillion in derivative financial instruments, of which $ 1.85 trillion was listed in futures and option contracts. In addition, Bear Stearns brought in more than $ 28 billion in 'level 3' assets on its books at the end of fiscal 2007 versus a net equity position of just $ 11.1 billion. This $ 11.1 billion backed $ 395 billion in assets, meaning a leverage ratio of 35.6 to 1. This highly leveraged balance sheet, comprised of many illiquid and potentially worthless assets, led to a rapid decline from investors and lenders of confidence , which eventually evaporated as Bear was forced to call the New York Federal Reserve to prevent the rapids of the looming counterparty risks that would occur from forced liquidation.
Starting from crisis - two subprime mortgage funds fail
On June 22, 2007, Bear Stearns pledged a loan of up to $ 3.2 billion in bail to "bail" one of their funds, Stearns Bear High-End Loan Fund, while negotiating with other banks to lend money from collateral to other funds. , Means Stearns High-Grade Structured Credit Enhanced Leveraged Fund. Bear Stearns originally put up only $ 25 million, so they hesitated about the bailout; Nevertheless, CEO James Cayne and other senior executives are worried about the damage to the company's reputation. The funds are invested in thinly promised debt obligations (CDOs). Merrill Lynch seized $ 850 million from underlying guarantees but was only able to auction off $ 100 million from them. The incident sparked fears of contagion because Bear Stearns may be forced to liquidate his CDO, driving down similar assets in other portfolios. Richard A. Marin, a senior executive at Bear Stearns Asset Management responsible for two hedge funds, was replaced on June 29 by Jeffrey B. Lane, former Deputy Chairman of the competing investment bank Lehman Brothers.
During the week of July 16, 2007, Bear Stearns revealed that two subprime hedge funds have lost almost all of their value amid a rapid decline in the market for subprime mortgages.
On August 1, 2007, investors in the two funds took action against Bear Stearns and the managers and top management officials and the risks. Jake Zamansky's law firm & amp; Associates and Rich & amp; Intelisano both filed an arbitration claim with the National Association of Securities Dealers who alleged that Bear Stearns misled investors about his exposure to the fund. This is the first legal action taken against Bear Stearns. Co-President Warren Spector was asked to resign on August 5, 2007, as a result of the collapse of two hedge funds associated with subprime mortgages. The September 21st report in New York Times notes that Bear Stearns posted a 61 percent drop in net income due to their hedge fund losses. By Nov. 15 statement Samuel Molinaro that Bear Stearns wrote a further $ 1.2 billion in mortgage-related securities and will face its first loss in 83 years, Standard & amp; Poor's downgraded the company's credit rating from AA to A.
Matthew Tannin and Ralph R. Cioffi, both former hedge fund managers at Bear Stearns Companies, were arrested on June 19, 2008. They face criminal charges and are found not guilty of misleading investors about the risks involved in the subprime market. Tannin and Cioffi have also been mentioned in lawsuits filed by Barclays Bank, which claims they are one of many investors who are misled by executives.
They are also mentioned in a civil lawsuit brought in 2007 by investors, including Barclays Bank, which claims they have been misled. Barclays claims that Bear Stearns knows that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund are worth much lower than their values. The lawsuit states that Bear Stearns managers have "plans to make more money for themselves and further use the Enhanced Fund as a storage for risky and poor quality investments." The lawsuit said Bear Stearns told Barclays that improved funding rose nearly 6% through June 2007 - when "in fact, the value of portfolio assets dropped dramatically."
Investor lain dalam dana termasuk Jeffrey E. Epstein Financial Trust Company.
Bailout dan penjualan Fed ke JPMorgan Chase
On March 14, 2008, the Federal Reserve Bank of New York agreed to lend $ 25 billion to Bear Stearns with assurance and asset-free assets from Bear Stearns to provide Bear Stearns liquidity for up to 28 days that the market refuses to provide. Shortly thereafter, the Federal Reserve Bank of New York changed its mind and told Bear Stearns that a 28-day loan was not available to them. The deal was then changed to where NY FED would make the company to purchase Bear Stearns assets worth $ 30 billion. Two days later, on March 16, 2008, Bear Stearns signed a merger agreement with JP Morgan Chase in a stock exchange worth $ 2 per share or less than 7 percent of Bear Stearns market value just two days earlier. This selling price represents a surprising loss since its shares have been traded at $ 172 per share by the end of January 2007, and $ 93 per share by the end of February 2008. The new company is funded by a $ 29 billion loan from New York FRB, and $ 1 billion from JP Morgan Chase (junior loan), with no further guarantees to JP Morgan Chase. This non-recourse loan means that the loan is secured by mortgage debt and that the government can not seize JP Morgan Chase's assets if mortgage loan collateral becomes insufficient to repay the loan. Fed Chairman Ben Bernanke defended the bailout by stating that the bankruptcy of Bear Stearns would affect the real economy and could lead to "chaotic investment" across the US market.
On March 20, Chairman of the Securities and Exchange Commission, Christopher Cox said the fall of Bear Stearns was caused by a lack of confidence, not a lack of capital. Cox notes that Bear Stearns' problem increases as rumors spread about his liquidity crisis which in turn erodes investor confidence in the company. "Although Bear Stearns continues to have a high quality guarantee to provide security for its loans, the market counterparty is becoming less willing to enter into funding arrangements with Bear Stearns," Cox said. Bear Stearns' liquidity pool started at $ 18.1 billion on March 10 and then fell to $ 2 billion on March 13. In the end the market rumors about Bear Stearns's difficulties became fulfilled, Cox said.
On March 24, 2008, a class action lawsuit was filed on behalf of shareholders, challenging the provision of the recently announced Bear Stearns acquisition of JPMorgan. On the same day, a new deal was reached that raised JPMorgan Chase's bid to $ 10 a share, up from the initial $ 2 offering, which means a bid of $ 1.2 billion. This revised agreement aims to calm angry investors and subsequent legal action against JP Morgan Chase as a result of the deal and also to prevent employees, much of their past compensation consisting of Bear Stearns shares, from going for other companies. Bailout Bear Stearns is seen as an extreme scenario, and continues to pose significant questions about Fed intervention. On April 8, 2008, Paul A. Volcker stated that the Fed has taken 'widespread action to the end of its legitimate and implicit powers'. View his comments on Luncheon of Economic Club of New York. On May 29, Bear Stearns shareholders approved the sale to JPMorgan Chase for $ 10 per share.
An article by journalist Matt Taibbi for Rolling Stone states that naked short sale has a role in the deaths of Bear Stearns and Lehman Brothers. A study by financial researchers at the University of Oklahoma's Price College of Business studied trading in financial stocks, including Bear Stearns and Lehman Brothers, and found "there is no evidence that stock price reductions are caused by bare short selling."
Maps Bear Stearns
Structure before collapsing
Managing Partners/Chief Executive Officers
- Salim L. Lewis: 1949-1978
- Alan C. Greenberg: 1978-1993
- James Cayne: 1993-2008
- Alan Schwartz: 2008-collapse
The largest shareholders of Bear Stearns as of December 2007 are:
- Barrow Hanley Mewhinney & amp; Strauss - 9.73%
- Joseph C. Lewis - 9.36%
- Morgan Stanley - 5.37%
- James Cayne - 4.94%
- Legg Mason Capital Management - 4.84%
- Personal Capital Management - 4.49%
- Barclays Global Investors - 3.10%
- Global Street State Advisor - 3.01%
- The Vanguard Group - 2.67%
- Janus Capital Management - 2.34%
See also
- Primary Dealer
- Lehman Brothers Bankruptcy
- Bear Stearns Merchant Banking
References
Further reading
- William Cohan, House of Cards: A Hubris Story and a Bad Excess on Wall Street , 2010.
External links
- JPMorgan Securities home page
- FRONTLINE : In Meltdown Analysis - The Bear Stearns Rescue
- New York Times Timeline of Bear Stearns
- Bloomberg: JPMorgan Chase to Purchase Bear Stearns for $ 240 Million
- J.P. Morgan buys bear in fire sale, as Fed extends credit to avoid crisis - WSJ
Source of the article : Wikipedia
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