Gasparino: The Right Question for Bear Stearns

Sometimes its good to do a little reporting before you spout off -- as some magazine writers have lately -- that reporters on CNBC took down Bear Stearns the week of March 10.

The popular notion is that a combination of rumor-mongering short sellers and chit-chatting reporters somehow banded together to raise enough issues with Bear that by Thursday of that week -- a day after Bear CEO Alan Schwartz told us on-air the firm was OK and two days after the CFO told me the firm was fine -- a run on the bank had begun.

So I went back and did some reporting on the week's events. At the time I reported that a run on the bank was a possibility. I knew hedge funds that were clients of Bear's prime brokerage division were thinking about pulling money out. On Tuesday March 11, I reported as much saying that Bear was worried about a run on the bank.

But according to two hedge fund managers, the run-on-the bank was beginning or had begun much earlier. Now these were NOT short sellers. These were supporters of Bear Stearns. They were prime brokerage customers with deposits inside Bear and were until then lending the firm money.

Here's what they had to say...

1. One of the hedge fund executives told me that he began creating custodial accounts the Friday before the firm imploded seven days later. He wasn't reacting to rumors, but to a growing sense in the market that Bear was too highly leveraged; the credit crisis was deepening; the firm's management didn't know what to do. All of which were true.

2. The other hedge fund executive had protected all his money by Tuesday morning, again for the same reasons.

Were they reacting to rumors? No way. They were reacting to facts -- the same facts that caused Jamie dimon to bid $2 a share for Bear - the firm was highly leveraging and holding $30 billion in impossible-to-price paper.

Now all this was happening on Friday through Tuesday, March 11.

That Tuesday afternoon, Bear CFO Sam Molinaro called me and said the firm is fine, which I then reported on air. The next day, Bear CEO Schwartz says this to CNBC:

"Some people could speculate that Bear Stearns could have some problems in there since we're a significant player in the mortgage business, none of those speculations are true...but it's a market that is concerned about things, yes....." (See video for full interview)

Now the question I have for both of these guys, were they really sure NONE of the speculation about the firm was true?

That's also the question the SEC should be asking both Molinaro and Schwartz as they do their investigation into whether rumors took down Bear Stearns.