« The Secret Service: This is Their Story | Main | WHEN DEMOCRATS AND REPUBLICANS WORK TOGETHER »

Unfounded Rumors and Conjecture Brought Down Bear Stearns

April 03, 2008 10:18 AM

Alan Schwartz, the president and CEO of Bear Stearns says several times in his 3 page written testimony before the Senate Banking Committee that during the week of MARCH 10th Bear Stearns "WAS ADEQUATELY CAPITALIZED and HAD A SUBSTANTIAL LIQUIDITY CUSHION..." 

But he adds that "due to the stressed condition of the CREDIT MARKET as a whole and the UNPRECEDENTED SPEED at which RUMORS and SPECULATION TRAVEL and ECHO THROUGH the MODERN FINANCIAL MEDIA ENVIRONMENT, the RUMORS and SPECULATION became a SELF-FULFILLING PROPHECY..."   

He starts the very next paragraph "I WANT TO EMPHASIZE THAT THE IMPETUS FOR THE RUN ON BEAR STEARNS was in the FIRST INSTANCE the RESULT OF A LACK OF CONFIDENCE NOT a LACK OF CAPITAL or LIQUIDITY.  Throughout this period, BEAR STEARNS had a CAPITAL CUSHION WELL ABOVE WHAT WAS REQUIRED TO MEET REGULATORY STANDARDS.  However, by Thursday of that week a tipping point was reached on liquidity.  THE MARKET RUMORS BECAME SELF-FULFILLING and BEAR STEARNs' LIQUIDITY POOL BEGAN TO FALL SHARPLY."

April 3, 2008 | Permalink | User Comments (1)

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/t/trackback/433071/27725228

Listed below are links to weblogs that reference Unfounded Rumors and Conjecture Brought Down Bear Stearns:

User Comments

Posted by: katrina | Apr 3, 2008 11:09:35 AM

Post a comment

Name:

Email Address:

URL:

Remember personal info?

Comments: