Wall Street Folly

It's Official: We've moved! Our new home is www.wallstreetfolly.com

Please join us over at our new Wall Street Folly site.  We're still working out some kinks, but it's up and running! (Note, if for some reason you're not directed to that site, keep trying.  It gonna take a bit for the redirection of our wallstreetfolly.com url to be propogated through the system.)

Former Bear Stearns CEO finds a temporary home at Rothschild

While Alan Schwartz still apparently hasn't made a decision about where he and his right hand man Richard Metrick will land, the NY Post is reporting that they've taken what they believe are temporary digs at Rothschild while he tries to sort out his options.

Rothschild Welcomes Ex-Bear Schwartz - NY Post

So who bought those $1.7 million waaaaay out of the money Bear Stearns options?

They must've known something.  Per Bloomberg....

On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.....

Whoever placed the bet used so-called put options that gave purchasers the right to sell 5.7 million Bear Stearns shares for $30 each and 165,000 shares for $25 apiece just nine days later, data compiled by Bloomberg show. That was less than half the $62.97 closing price in New York Stock Exchange composite trading on March 11. The buyers were confident the stock would crash.

``Even if I were the most bearish man on earth, I can't imagine buying puts 50 percent below the price with just over a week to expiration,'' said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. ``It's not even on the page of rational behavior, unless you know something.''......

Bringing Down Bear Began as $1.7 Million of Unsuspected Options - Bloomberg

More speculation on where former Bear Stearns CEO Alan Schwartz (and his trusty sidekick) might land

Package deal: Sounds like one of the big considerations in former Bear Stearns CEO Alan Schwartz's decision as to where he might land is whether he'll be able to bring a trusted Bear Stearns confidante with him.  Richard Metrick, a 20 year Bear veteran in his mid-60s, who was a senior managing director with the firm, will need to be part of the deal according to the NY Post.  Firms said to be in the running for Schwartz, who won't be staying with JP Morgan, include the oft mentioned KKR, Warburg Pincus, Citigroup, Goldman Sachs, Centerview Partners and Evercore Partners.

Bear's Schwartz Mulling Job Offers - NY Post

So where will Alan Schwartz land now that he's leaving JP Morgan? KKR?

Former Bear Stearns CEO Alan Schwartz and JP Morgan are officially parting ways.  JP Morgan issued an internal memo to employees which was read to TheStreet.com: 

"With most of the work on the merger integration behind us, Alan will be moving on from the firm at the end of August to pursue other interests," said the memo, signed by CEO Jamie Dimon and the co-heads of the investment banking unit, Steve Black and Bill Winters.

"Despite the extremely difficult circumstances that brought our firms together, Alan has been a terrific and constructive partner throughout the process," the memo stated. 

So will he land at KKR as has been the rumor for some time?

Goldman's Blankfein doesn't seem to recollect key conversation with Bear Stearns' Alan Schwartz where he suggested GS traders were spreading false rumors

Wouldn't a conversation like this be kind of memorable?: Say that the CEO of a large investment banking firm was hearing rumors that traders at an even larger competitor's firm were spreading malicious rumors about its stock, and then called the competitor's CEO to ask about whether or not it was true.  Wouldn't it be kind of likely that that conversation would be a bit memorable to the guy on the receiving end of the call?   Apparently not in the case of Bear Stearns CEO Alan Schwartz, when he called on Goldman Sachs CEO Lloyd Blankfein to chase down the source of rumors that many believe were at least partially responsible for the demise of Bear Stearns.  According to this morning's WSJ, a spokesman says that Blankfein doesn't recall the conversation.  Blankfein's a pretty busy guy, but still, not recalling a conversation like that strains credibility.  So someone is fibbing about whether the conversation did or didn't happen.  Bizarre.  Goldman denies doing anything wrong.  According to Goldman spokesman Lucas van Praag "We went out of our way to be supportive of Bear and were rigorous about conducting business as usual."

Lehman's Dick Fuld is said to have had a similar conversation with Blankfein......

No decision on where former Bear Stearns CEO will land til the end of the summer

Sounds like former Bear Stearns CEO Alan Schwartz, who reigned over the firm for three months before it unraveled, won't be making a decision about where he'll be landing until the end of summer.  But according to the NY Post he's been having conversations with private equity guys, including Kohlberg Kravis Roberts although they wouldn't confirm that.  Sounds like while JP Morgan is still hoping to meet with Schwartz, they're not expecting that he'll join the firm.

Some other Bear Stearns senior execs have new jobs though.  Jeffrey Lane, formerly head of Bear Stearns Asset Management, who only joined Bear last summer from Lehman Brothers, is joining Modern Bank NA as its CEO.   The private bank, formed 2 years ago,  caters to high-net-worth individuals.

Also, Michael Solender, Bear's former general counsel, has landed at Washington Mutual as EVP and chief legal officer.

Bear's Schwartz To Mull Bids Over Summer - NY Post

Bear Stearns executives score new jobs - The Deal

It's over: Bear Stearns holders have approved the JPM merger by a substantial majority

According to CNBC, the merger will be completed tomorrow. Jimmy Cayne and Alan Schwartz reportedly both addressed those behind the very short and organized closed door meeting.  Cayne noted that Bear was being acquired by "a first class firm".

The End: Part 3 of the WSJ's chronicle of Bear Stearns' fall; How Jamie Dimon dissed Citi's Vikram Pandit and scolded him to "stop being such a jerk"

In today's WSJ is their final installment of the fall of the Bear: "Bear Stearns Neared Collapse Twice in Frenzied Last Days". One  thing we found pretty funny in this totally unfunny story:  On the conference call among Wall Street CEOs on the fateful Sunday night when the $2 Bear deal was announced, there was an exchange between Jamie Dimon and Citigroup's Vikram Pandit, the junior CEO on the block:

Messrs. Geithner and Dimon led off with some brief remarks, noting that J.P. Morgan would be guaranteeing Bear Stearns's debts and that if the pact hadn't come together, the market impact may have been catastrophic. During the question-and-answer session, Citigroup Inc.'s new CEO, Vikram Pandit, spoke up.

Mr. Pandit -- who did not initially identify himself -- asked a shrewd but technical question: How would the deal affect the risk to Bear Stearns's trading partners on certain long-term contracts?

The query irked Mr. Dimon. "Who is this?" he snapped. Mr. Pandit identified himself as "Vikram." Offended that Mr. Pandit was taking up time with what he considered granular inquiries, Mr. Dimon shot back, "Stop being such a jerk." He added that Citigroup "should thank us" for staving off further mayhem on Wall Street.

Part 2 of the series: "Fears, Rumors Touched off Fatal Run on Bear Stearns

This morning's WSJ has part 2 of its 3 part must-read fall of Bear Stearns Saga.  This installment chronicles what led to the run on the bank, first described by CEO Alan Schwartz at a March 13 lunch as "a whole lot of noise".  Execs at the meeting, like Mike Minikes, weren't so sure that's all it was.  And as we all know now, the noise was a killer;  by the end of they day they had blown through $15 billion in cash and Alan Schwartz had to interrupt Jamie Dimon's 52nd birthday party celebration looking for help.  Ultimately, JPM agreed to provide financing for 28 days, and Bear thought that it had bought some time to arrange more permanent financing....

Out in the audience, Michael Minikes wasn't so sure. The 65-year-old Bear Stearns veteran had spent much of that week fielding calls from worried clients. Some had yanked large sums from their Bear Stearns accounts. The worst news had come when Renaissance Technologies Corp., a major hedge fund and trading client, said it was shifting more than $5 billion to competitors.

"Do you have any idea what is going on?" Mr. Minikes asked, cutting off his boss. "Our cash is flying out the door. Our clients are leaving us."

It was the beginning of a frantic 72 hours that would bring the Wall Street firm to its knees and threaten the stability of the global financial system. Interviews with more than two dozen current and former Bear Stearns executives, directors, traders and others involved show how quickly a company that took 85 years to build could unravel.

Fear, Rumors Touched Off Fatal Run on Bear Stearns - WSJ