Bear Stearns Bailout
Investment bank Bear Stearns completed an emergency deal on March 16, 2008, to be bought by JPMorgan Chase & Co. Bear was forced into a government-led bailout on March 14 after finding itself unable to meet the demands of lenders and customers trying to pull their cash out. Here's a look at recent events at the 85-year-old firm:
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Bear reports a 10 percent decline in quarterly earnings as the mortgage market shows signs of cracking. Chief Financial Officer Sam Molinaro says, "We are impacted in a weaker mortgage market until that industry turns around."
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Reports say Merrill Lynch seized collateral from a Bear Stearns hedge fund invested heavily in subprime loans - those made to people with poor credit.
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Bear commits $3.2 billion in secured loans to bail out its High-Grade Structured Credit Fund, says company's troubles are "relatively contained."
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Bear tells clients that the assets in one of the troubled funds are essentially worthless, while those in the other are worth 9 percent of their value at the end of April.
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The two funds file for bankruptcy protection and the company freezes assets in a third fund.
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Co-President and Co-Chief Operating Officer Warren Specter resigns. Alan Schwartz becomes sole president. CFO Molinaro takes over co-COO role.
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Bear sends letters to clients reassuring them the company is financially sound. "Rest assured, Bear Stearns has seen challenging markets before and has the experience and expertise to serve you and us well," the firm says.
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Bear reports 68 percent drop in quarterly income. The company's accounts slipped by $42 billion between the end of May and the end of August.
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CFO Molinaro says Bear will write down $1.62 billion and book a fourth-quarter loss.
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Bear lays off another four percent of its staff, two weeks after cutting two percent of its work force.
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Bear takes $1.9 billion write-down. CEO Cayne says he'll skip his 2007 bonus.
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CEO Cayne retires under pressure. Schwartz takes over.
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Financial stocks swoon as economists predict the U.S. economy will slip into recession. President Bush unveils a $150 billion stimulus plan.
Who's Who: The Plan
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Subprime woes spread to a broad range of assets, including certain kinds of municipal debt.
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Market rumors say Bear may not have enough cash to do business. "There is absolutely no truth to the rumors of liquidity problems that circulated today in the market," Bear says.
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Schwartz goes on CNBC to reassure investors his company has enough liquidity and he is "comfortable" it turned a profit in the fiscal first quarter.
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The federal government and JPMorgan Chase & Co. bail out Bear. The company says it sought the emergency funding after realizing it would not be able to keep up with a spike in demand from lenders.
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JPMorgan announces it has acquired Bear Stearns for $2 per share, or about $236 million.
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Bear Stearns Cos. shareholders approve JPMorgan Chase & Co.'s $2.2 billion buyout of the investment bank whose big wagers on subprime mortgages led to its near-collapse.
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In the first criminal case of the credit crisis, two former Bear Stearns managers were arrested on charges linked to the collapse of a hedge fund that ignited the subprime mortgage mess. Ralph Cioffi, 52, and Matthew Tannin, 46, were handcuffed and taken into custody by federal agents. The men have been the target of a year-long probe by federal prosecutors.
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Credits:
The Associated Press
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