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Requiem for Bear Stearns: The First Domino to Fall

It’s been a year since the fall of Bear Stearns hit Asia like a storm out of nowhere the Monday morning of March 17th 2008. Once the fifth largest investment bank in the U.S., Bear Stearns now goes down in history as one of the biggest financial casualties of the 2008 sub-prime mortgage crisis.

But perhaps the most memorable thing about the demise of Bear Stearns is how swiftly the bank fell.

The week before going under, Bear Stearns was proclaiming its robust health, insisting there were no problems and that there was virtually zero probability of failure. Company executives told CNBC and other media outlets that they were a healthy institution. So healthy, in fact, they were out raising money based on this very premise.

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Its fall was all the more shocking for its employees in Asia, far removed at that time, from plummeting American property prices and the resulting chaos in the form of the subprime mortgage crisis.

Jim Antos, a former analyst with Bear Stearns, never saw it coming. “I sort of feel like the little baby in the bubble to tell you the truth, because we were involved with our business here in Hong Kong and in Asia during a very strong boom time. We didn’t have time to think about the U.S. Actually, it came as quite a surprise”, the Hong Kong-based analyst, said.

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There was no sense that Bear Stearns had overleveraged itself. No sense of impending doom at all in Asia.

“The thing is, we didn’t really know that (what was happening) in Hong Kong. All we knew was that our business was growing and it was profitable and expanding … The only time I was even aware of the subprime mortgage lending was when I went to the dentist one time when I was in the U.S. visiting. It really wasn’t on my radar screen – I was so Asia focused”, Antos said.

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And then in the matter of 72 hours, Bear Stearns’ capitalization fell from $18 billion on Wednesday, 12th March to roughly $2 billion on Friday, 14th March. That weekend, during emergency meetings, a deal was made.

As Monday dawned in Asia, the news broke. JPMorgan Chase was buying Bear Stearns for $2 a share.

Antos recalls, “I was in Los Angeles. I was doing one of the last marketing trips probably of anyone in Bear Stearns history. I was done with the marketing trip and I was visiting my daughter. It was 8 o’clock in the morning. One of my colleagues from Hong Kong called me. It was of course 11 p.m. at night. He said the share price had dropped by 50 percent in the first two hours of trading. My reaction was, and I told him at the time, ‘if that’s true, the company’s finished’. As it turned out, the company was finished.”

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When asked if there was anything he would have done differently … “You mean if I was the master of the universe and running Bear Stearns? Well, you only know this later when it’s too late. So I think realistically speaking, I would have been caught up in the bubble with everyone else. So probably not.”

It’s now one year after the fact. Jim Antos and many other former Bear Stearns employees in Asia have moved on. In a sense, they were kind of lucky to have lost their jobs early in 2008. This especially hit home when six months later, Lehman Brothers collapsed.

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“I was stunned … they (U.S. government) could see the dominos falling in the financial sector and honestly Lehman Brothers wasn’t a lot more different in size. I don’t really, even today, understand why Bear Stearns was rescued – I lost my job of course – but it was sort of rescued, it didn’t completely disappear. It’s now gone. And Lehman Brothers was simply allowed to close up suddenly. I really don’t understand that.”

What's left is history and a requiem for Bear Stearns.

On 17th March 2008, JPMorgan Chase offered to purchase Bear Stearns for the then agreed price of $236 million, or $2 a share. JPMorgan completed its acquisition of Bear Stearns on 30th May 2008, at the renegotiated price of $10 per share.