Investment Banking: Bear Stearns

Investment Banking: Bear Stearns Case Overview

Bear, Stearns & Co. Inc is one of the largest investment bank , trading house and stockbroker company. Its main business segments are based on 2006 contributions which include capital markets (80%), asset management (10%) and services compensation (10%). A pioneer in the products of securitization, the investment bank, then the 5th of Wall Street , has been widely exposed to the subprime crisis and, despite a bailout of the Federal Reserve Bank of New York in March 2008 , had to be sold to the commercial bank JPMorgan Chase at a price of $ 10 per share (the latter is evaluated before the crisis to more than $ 133). The bankruptcy of a precursor event was the collapse of the banking business of Wall Street in September 2008 and the financial crisis.

Key Issues

In the financial industry, companies are significantly integrated with other companies. If one company is affected by financial crisis, than it could create problems for many others. Same case happened with Bear Stearns, as the company was badly affected by the financial crisis. Since, the company did not follow proper risk management practices, which resulted in severe problems and it had to bear the problems.

Case Analysis

Bear Stearns World Headquarters is located in Madison Avenue, New York . It was sold in 2008 with the rest of the bank to JPMorgan Chase. The company was founded in1923 byJoseph Bear, Robert Stearns and Harold Mayer as a trading company with equity. Its clients include corporations, institutions, governments and individuals. The company's business includes corporate finance, mergers and acquisitions, companies listed on the stock exchange and fixed income sales, trading and research, private client services, derivatives, international market and futures contracts, asset management and investment services.

Symbol as few of the investment in bonds, the antagonist of the actions lived up to its name, bears the emblem of stock bear markets. Until recent days, Bear Stearns still boasted on its website from 83 years of uninterrupted benefits. It was a symbol for Wall Street banks, one of the seven sisters of the banking business along with Citigroup, JPMorgan , Goldman Sachs, Morgan Stanley , Lehman Brothers or Merrill Lynch . But in 2007, the path was cut short so dramatically that ended the biggest collapse of a major Japanese bank since the crisis of the 90. After arriving to trade above $ 150 less than twelve months, its shares fell this week below $ 3.

Its board of directors, chaired by James Cayne, had to find a solution to the obvious risk of solvency to the outflow of funds from the bank. With the approval of Treasury Secretary Henry Paulson and Federal Reserve support, which opened a special line-financing for the transaction, Bear Stearns was launched in the arms of JPMorgan Chase, the second largest U.S. bank, for just $ 270 million to $ 2 per share. The operation has been called "the best deal since the Dutch bought Manhattan from the ...