Shostack + Friends Blog Archive


Bear Stearns

Dan Geer is fond of saying that financial risk management works
because everyone knows who owns what risks.

Reports are that JPMorgan just bought Bear Stearns for $236MM, a 93% discount to Friday’s closing price, with $30BB of US taxpayer money thrown in (as guarantees) for good measure. Bloomberg also reports that the Bear Stearns headquaters are valued at $1.2 BB, which means that the firm’s net market positions are a liability of about ($31BB).

Apparently, Bear Stearns owned less of the risk than the Fed. I
wonder when the Fed knew that? According to the same New York Times story, Bear Stearns has known it all along:

Even up until last week, Alan “Ace” Greenberg, Bear Stearn’s chairman for more than 20 years and a champion bridge player, still regaled its partners over lengthy lunches about gambling with the firm’s money in its wood-paneled dining room.

The firm’s money, indeed.

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