Fightin’ in the Street

In reading “Street Fighters: The Last 72 Hours of Bear Stearns, The Toughest Firm on Wall Street”, one gets the feeling that our financial system is beginning to rise up against us beyond our control, much like the machines in the Terminator movies. “Street Fighters” was written by Kate Kelly, a Wall Street Journal reporter, about the recent collapse of Bear Stearns, one of Wall Street’s oldest and most resilient firms.

Although the book details primarily the pivotal three days in March 2008 in which Bear Stearns, facing bankruptcy, was bought by J.P. Morgan, it also delves into the history of the firm and it’s most powerful players. The structure of Bear Stearns is uniquely American, as the men in control of Bear all make great American success stories.

Don't get into a street fighter with Rocky.
Street Fightin’ Men

The firm made its name embracing the “P.S.D.” – men who were poor, smart, and had a strong desire to be rich. Lack of a prestigious degree or that you were an outcast from a rival firm meant little if you were willing to do whatever it took to make the company and yourself rich. Inside Bear’s dysfunctional structure, the only commonality most had was making money. Bear’s brash and unapologetic style, with leaders that were as arrogant as they were rich, made it infamous, yet enabled it to thrive through crises like the Great Depression.

It was Bear’s management oversight, naivety, and eventual collapse that kicked off the economic troubles our country is mired in today. But, the alarming part of Kelly’s hour by hour account of the collapse is that none of the key players, not Bear execs, the Federal Government, or other Wall Street players, seem to have a handle on the situation. “Fighters” describes Bear’s collapse as a once-in-a-decade financial perfect storm. In short, Bear Stearns carried too many mortgage-backed securities and when trouble started to brew, debtors came calling, others grew weary of trading with the firm, hysteric selling of stock ensued, and Bear could no longer come up with the cash to make it through another day of trading.

The financial action is juxtaposed against individual Bear employees, who, with many investing lifetimes at Bear Stearns, stand to lose the most. While the top brass does everything they can to secure a last minute deal to ward off bankruptcy, many grapple with the implications of working so hard for a company that’s a sinking ship.

“There are thousands of people just going about their jobs here, [Bob Upton, Bear Stearns Treasurer] thought, and they have no fucking idea that were on the verge of collapse.”

In fact, “Street Fighters” is the perfect allegory for America itself. Instead of being taken as interesting reading for the financially inclined, “Fighters” should serve as a cautionary tale for all patriots who naively believe the United States is invincible. American finds itself caught in its own crisis, in part due to the events detailed in Kelly’s book. I believe the United States to be a great country and am thankful for the many opportunities I enjoy and freedoms I take for granted because I had the good fortune to be born here. But, just because America was brash and tough enough to survive in the past, doesn’t guarantee anything for the future. Remember, Bear executives also falsely believed they’d weather infinite trouble because they always had in the past. But, much like Bear, as our national debt increases by almost 4 billion dollars per day, I worry once our rivals see blood in the water, they will come calling as was the case with Bear.

In the end, which is more surprising – that Bear Stearns collapsed or that its executives, the Federal government, investors, and financial experts all believed it would never collapse, or at very least last long into the foreseeable future. The so-called experts were all caught off guard by how fast and complete Bear’s demise was. It shouldn’t be so shocking – After all, don’t all man-made empires eventually collapse?

This entry was posted in Blogroll, Books. Bookmark the permalink.

Comments are closed.