The Fall of Bear Stearns by Kate Kelly

The Wall Street Journal’s three part series, “The Fall of Bear Stearns”, by Kate Kelly,chronicles the final days of the once titan investment bank. Kelly focuses on the leadership ofBear Stearns and its inability to prevent its own collapse as well as the decision making processthat ultimately led to the bailout of the firm by the Federal Reserve. Because this piece is meantfor the Wall Street Journal, Kelly does not take an academic approach to the paper. Rather, shehighlights some of the main problems plaguing Bear and presents the series of events to create aneasily digested summary as to how the firm almost fell. Overall, the three pieces together are a great summary of the events that took place. TheWSJ is reliable for a riveting story, but it may have missed an opportunity with this story. Ratherthan just report the story as it happened, Kelly could have investigated why certain actions weretaken or not taken. For example, the article discusses the numerous talks Bear had with possibleequity investors. It is never explained which, if any, had potential nor why none came to fruition.Did Bear not find the terms of any deals palatable, or did potential investors think the bank was alost cause? The discussions with KKR seem to have gone reasonably well. Kelly suggests KKRhad reservations but never specified what they are. Bear did got cold feet, fearing it would losethe business of KKR competitors, but it is also likely the discussions fell apart over price asBear’s stock price was still healthy at the time. Additionally, why was the firm so reluctant to cutits losses on its mortgage backed assets? They were understandably difficult to dispose ofconsidering the overall housing and mortgage crisis, but why did management decide to hedge

their bets rather than listen to advice to “cut” the assets? The article only glosses over this issue,whereas it seems to be one of the most important factors in Bears fall. While this is not an opinion