Obituary: Bear Stearns
Overdue Obituaries for what we have lost in the past year. Part I:
March 17, 2008 – Bear Stearns Co. Inc., the smallest of the five big investment banks, died today after being acquired by JP Morgan Chase. He was 85 years old.
His death marks the end of an incredible journey of a firm known for its aggressive culture. From its founding in 1923, Bear Stearns has nurtured many ambitious PhDs, as in Poor, Hungry, and Driven. Its culture contrasts with other button-down Wall Street firms, where pedigree is deemed paramount.
Bear Stearns started as an equity-trading house with $500,000 capital. The firms businesses later expanded into wealth management and clearing, but its primary business remained in capital markets. This business division, which encompasses equities, fixed income and investment banking, accounted 80 percent of net revenue in 2006. The firm became public in 1985, and employed more than 15,000 people.
In July 2007, two Bear Stearns hedge funds that invested in risky debt instruments collapsed. This event is widely recognized as the beginning of the 2008 financial tsunami that sank some of the grandest names on Wall Street. As the credit markets deteriorated, rumors of Bear Stearns’ financial health shook investors’ confidence and the company’s stock lost almost half its value. It culminated in a government-brokered takeover by J.P.Morgan amid unprecedented panic in the market place.
Bear Stearns is now a division of J.P.Morgan Chase that focuses on serving high net-worth individuals. Other parts of the businesses have been absorbed into the parent firm. It is expected that the name, Bear Stearns, will be dropped off the brand eventually.
(Part II and Part III to follow)
