Bear Sterns collapse was unavoidable: Former CEO
Former Bear Sterns' CEO James Cayne, and Alan Schwartz who succeeded him for few months in 2008, are saying that they did all they could to keep it afloat before it fell victim to an unstoppable run on the bank.
Former Bear Sterns' CEO James Cayne, and Alan Schwartz, who succeeded him for few months in 2008, are saying that they did all they could to keep it afloat before it fell victim to an unstoppable run on the bank. These two executive are going to appear before bipartisan panel investigating the roots of the crisis.
Cayne said in his testimony prepared fro hearing that.”The firms collapse was due to overwhelming market forces that Bear Sterns' could not resist.”
Bear Sterns was first Wall Street bank to fall in recent financial Tsunami. Two of the banks hedge funds failed in June 2007 as a result of bad bets on subprime mortgage market, costing investors $1.8 billion. This led to a domino effect and chain reaction brought down the bank to the brink in March 2008.
The Financial Crisis Inquiry Commission is looking at Bear Sterns as a case history of shadow banking system. Implying that a network of financial institutions and market operates outside the regulatory structure.
The 'Big Five' investment banks, including Bear Sterns, were in a voluntary program of supervision by the SEC established in March 2004. It was terminated in September 2008 by SEC Chairman Christopher Cox, who said it clearly hadn't worked. Cox and his predecessor Donaldson will appear before the Commission on Wednesday.
The members of the inquiry panel are going to grill Cayne, Schwartz and three other executive of Bear Sterns. It will be Cayne's first public appearance in the aftermaths of crisis. Cayne had led Bear Sterns for 15 years before the crisis.
Financial tsunami uprooted and weakened several well established giants, Lehman Brother, which filed the biggest bankruptcy in U.S. Washington Mutual, the biggest bank to fail, Merrill Lynch, and AIG teetered near collapse. They received %180 billion bailout aid from government.
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