What's truly odd about the demise of a Wall Street firm, it turns out, isn't the noise of the implosion but the quiet of the rubble. A post-calamity hush has...
NEW YORK — What’s truly odd about the demise of a Wall Street firm, it turns out, isn’t the noise of the implosion but the quiet of the rubble.
A post-calamity hush has settled over Bear Stearns’ Manhattan headquarters. Traders who haven’t left their desks for years take two-hour lunches. The phones rarely ring. A company with 14,000 employees, once known as the scrappy bantam of the financial world, is a zombie in a dark-blue suit.
Shareholders voted Thursday in New York to approve the reduced-for-clearance sale of Bear Stearns to rival and next-door neighbor JP Morgan Chase. The price — $10 per share — would have been about as welcome as an obscene gesture last year, when Bear traded as high as $171.
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But in the span of a week in mid-March, the firm basically vaporized.
“We knew it was a storm, but we didn’t know it was THE storm,” recalls Fares Noujaim, a Bear Stearns vice chairman.
On Tuesday, Noujaim, who is 44 and dressed in an impeccable pinstriped suit, is standing in his office on the top floor of Bear’s headquarters. All that is left is a killer view, a phone and a two-screen computer monitor on a bare floor.
You think your office is depressing? Try a company where as many as 10,000 employees could soon be laid off. For added grimness, imagine a company that’s been taken over by a former enemy.
Down at the fixed-income trading floor, there are rows of computers and black chairs, an indoor prairie that looks 2 acres in size. At full bustle, rooms like this convey the blood lust that is capitalism at its most carnivorous.
Now, most of the seats are empty. In the few that are filled, traders read newspapers or idly chat on the phone while a Microsoft logo floats around their sleeping monitors.
“This is deathly quiet,” Noujaim says. “When this place was functioning, it was a battleground.”
The proximate cause of Bear’s passing was a good old-fashioned run on the bank. Hedge-fund investors, spooked by rumors that the company’s balance sheets were awash in toxic subprime-mortgage securities, drained it of so much cash that it went bust. Some $17 billion dollars flew out the door in two days in March.
The asset-transfer system, which wasn’t designed for an exodus of greenbacks on this scale, froze for a while. Fund managers were said to be in the lobby, demanding their money.
In a sense, Bear was gossiped to death. The company fought back with what several employees consider a mediocre PR operation, one complicated by a bit of bad luck.
When Bear CEO Alan Schwartz was interviewed March 12, a few days into the meltdown, his no-problems-here refrain was interrupted in midsentence.
“I’m sorry to jump in here,” said CNBC anchor Erin Burnett, who suddenly appeared on the screen. “Breaking news, though, we do want you to know that we have New York state officials confirming that New York Governor Eliot Spitzer will resign today.”
Schwartz’s attempt at pushback was too little and might have been too late, since the momentum was nearly tsunami strength by then and wiped out the company a mere five days later.
The day of Schwartz’s CNBC appearance was the day workers started to panic. Especially after a senior managing director stood on a desk and announced everything was fine.
“He was so adamant,” says a worker, “that we all realized, ‘Oh my God, we’re not fine.’ “
Everyone at Bear has a mild case of sudden infamy. The company has come to embody the excesses blamed for what is all but officially a national recession, and it achieved something close to villainy after the Federal Reserve Board promised $30 billion to backstop the sale to JP Morgan.
Protesters showed up in Bear’s lobby, chanting “Help Main Street, not Wall Street.” Schwartz was summoned to Congress, where he was gently barbecued.
Sen. John McCain denounced “very greedy people” on Wall Street in a meeting with reporters and singled out Chairman James Cayne, “who decided the day before he was bailed out by the federal government to cash in millions of dollars’ worth of stock.”
This is true, though Cayne’s sale will be remembered on Wall Street not for how much it netted him, but how little. His shares were worth $61 million when he sold them in late March. They were worth about $1 billion last year.
When two Bear hedge funds collapsed in July, then-CEO Cayne was reportedly at a bridge tournament, incommunicado.
“To tell you the truth, I’m psyched to work for JP Morgan,” says a member of the prime brokerage division. “I’m happy to get away from these knuckleheads.”
The atmosphere is so fraught that when Cayne, 74, walks around the Bear office he’s accompanied by beefy security guards. Word around the company is the guards are to protect him from his own employees.