Investment Markets » Banking and Finance
What Price Bear Stearns?
JPMorgan Chase has landed a bargain acquiring a legendary bank every bit as idiosyncratic as its former boss.
The whispers began on Wednesday, and by Sunday it was all over. And it was perhaps symbolic that, as word of Bear Stearns' imminent collapse began filtering through, the bank's chairman Jimmy Cayne was at the bridge table – exactly where he'd been last year when the firm's troubles first began to deepen. Cayne's mobile was ringing constantly, but there was no way the competitive 74-year-old could be disturbed. He saw Bear go out in much the same way as he built it into Wall Street's fifth largest bank – idiosyncratically.
Until his ousting as chief executive at the beginning of the year, Cayne personified the bank's reputation as Wall Street's pugnacious underdog whose continued survival as an independent entity defied persistent predictions of its demise. Ironically, it was another collapse – that of the hedge fund Long Term Capital Management in 1998 – that defined his reputation.
When the New York Federal Reserve tried to co-ordinate a rescue, Bear Stearns, alone among the big banks, refused to play ball, sparking an angry confrontation with rivals and marking Cayne out as an outsider in the Wall Street Club.
The former scrap-metal dealer appeared to revel in both his, and Bear's, reputation as freewheeling rebels (although he strenuously denied allegations made by The Wall Street Journal that he had smoked marijuana at a bridge tournament). But memories are long on Wall Street, and it may have come back to haunt Bear, in its own hour of need, that Cayne never placed much value on being nice to others.
The new man of the moment is JPMorgan Chase boss, Jamie Dimon. In fact, give him a walrus moustache and a cigar and he might even begin to look like the firm's legendary founder J. Pierpoint Morgan, who stepped in to halt the great banking panic of 1907. Dimon has the same tough-talking reputation as his predecessor, but you can't compare their financial heroics. Dimon's work as a financial fireman might go down in history – and he certainly got a bargain, snapping up Bear Stearns for a paltry $236m.
But JPMorgan has neither the funds nor the prestige to stop a worldwide panic. The sale of such a proud name for such a pittance is a point of surrender that would not have been even remotely conceivable six months ago.
It was Bear Stearns that marked the start of the credit crunch last July when two of its hedge funds imploded. It would be heartening to think its rescue would signal the end. Regrettably, that's unlikely to be the case.
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