CREDIT CRISIS HITS WALL STREET / WSJ, March 18, 2008

March 18, 2008

This is the sad part, when workers loose their entire life savings because of Wall Street greed. Meanwhile, the executives make out like bandits - complete mierda!

CREDIT CRISIS HITS WALL STREET

'We Are All in a Daze,'
Says One Employee;
Life Savings Wiped Out
By PETER LATTMAN and JENNY STRASBURG
March 18, 2008; Page C1

NEW YORK -- The bagpipes from New York's famed St. Patrick's Day parade a block away provided a funereal soundtrack as workers at Bear Stearns Cos. headquarters mourned their company and the loss of billions in personal savings.

BEAR STEARNS FALLOUT

• Charts: Timeline of a Crisis1
• Inside the Bear Bailout2
• Lehman In Center of Storm3
• Further Stimulus Likely4 | Fed Echoes Japan5
• Wall Street Firms Are 'Buys,' but When?6
• For Bankers, Trust Becomes Rare7
• Fed Could Profit From Bailout8
• Brokerage Accounts Mostly Safe9
• Bear's Ripples Reach Corporate Sector10
• Calling All Recruiters11
• Breakingviews: A Case for a Better Deal?12
• Job/Stock Double Whammy13 | $2 May Be It14
• J.P. Morgan's Office Deal15
• 'Repo' Trading Is Light16J.P. Morgan Chase & Co.'s deal to buy Bear Stearns for $2 a share wiped out the life savings of many of Bear's 14,000 employees, who owned one-third of the firm's shares. Most employees at Bear, known for its loyalty and a strong merit-driven culture, expected to lose their jobs.

"It's devastating," said Stephen Raphael, 62 years old, a semiretired Bear broker who joined the firm in 1974. "I have a lot of good friends here, from mail clerks to senior people. I've spent more time at Bear Stearns than I have with my own family."

Mr. Raphael, a Bear Stearns board member until recently, said he spent the weekend telling clients their money was safe and added that all Wall Street brokers were vulnerable. "I blame the system, I blame greed," he said. "Wall Street is really predicated on greed. This could happen to any firm."

Bear Stearns shares were worth $160 each a year ago and $87 fewer than three weeks ago, which left employees gaping at the $2-a-share deal price. At its peak, the employees' stake in Bear was valued at $6.3 billion. At the deal price, it was worth $79 million. (At Bear's price of $4.81 in 4 p.m. New York Stock Exchange composite trading yesterday, the stake had jumped to about $190 million.) Recently, employees were unable to sell shares because of a blackout period before Bear's earnings release.

One trader said that when he first saw the $2 price, he thought it was a typo. "Two dollars a share?" he said. "I thought it had to be $20."

• The Scene: Bear Stearns headquarters, midtown New York.
• The Emotions: From shock and heartbreak to anger and incredulity.
• Voices: "I blame the system; I blame greed," said former board member and longtime employee Stephen Raphael. Said Carol Guenther, an executive administrative assistant: "I am very, very upset, heartbroken, actually. I figure I will probably be laid off."Firefighters in kilts and St. Patrick's Day revelers on their way to the parade streamed by Bear employees smoking cigarettes in front of the firm's headquarters. Many Bear employees blamed Chairman and former Chief Executive James Cayne, current CEO Alan Schwartz and Chief Financial Officer Sam Molinaro for failing to bolster the firm's financial position when they could have and for taking outsize pay packages.

"Two weeks ago, these guys said they didn't need to raise more capital," said a fixed-income executive who has been with the firm for 16 years. "And now they're selling the firm for a quarter of the price this building is worth!"

Two employees who service the mortgage-trading desk have been with Bear Stearns for nine years and seven years, respectively. One, a resident of Staten Island, says he has lost $600,000 in Bear Stearns stock, virtually his entire life savings. The other, from Port Washington, N.Y., her lip quivering, said she has lost $400,000.

A Culture Gone

Employees also lamented the loss of Bear's rough-hewn but familial culture, which sought out employees it described as PSDs -- poor, smart and with a deep desire to be rich. Former CEO Alan "Ace" Greenberg, now 80, still comes to work at a desk on the firm's trading floor, but his mantras to reuse paper clips and rubber bands became increasingly anachronistic during the recent boom years when Bear moved into its new tower and Mr. Cayne became the first Wall Street CEO to have a personal stake in his company valued at $1 billion.

Even in these tough times, Mr. Greenberg, who is chairman of Bear's executive committee and a director on the firm's board, has maintained his business etiquette, showing up for work as usual and returning calls promptly. Still, one associate who saw him over the weekend described his reaction as one of "shell shock." Reached yesterday for comment, Mr. Greenberg dismissed that description. "I wouldn't even comment on that -- it's silly," he said, before referring questions to Bear's spokesman.

Mr. Greenberg's thriftiness fits closely with J.P. Morgan CEO James Dimon's emphasis on cost cutting, but the risk-taking culture of a Wall Street trading house is very different from the button-down attitude of a big commercial bank with more than ten times as many employees.

"I am very, very upset -- heartbroken, actually. I figure I will probably be laid off," said Carol Guenther, 38, an executive administrative assistant who has worked at Bear Stearns for 13 years. "I love the people I work with. And Bear is very good to employees. So, we have a great sense of teamwork. Now, we are all in a daze," she said.

Wall Street recruiters are being inundated with calls from Bear employees. Options Group fielded nearly 100 calls yesterday from Bear Stearns executives and middle managers world-wide, said CEO Michael Karp, adding that money-management firms and small investment banks are quickly trying to snap up employees. "Some people will walk before the deal closes," Mr. Karp said. With their employer being sold for $2 a share, "it's a lot easier to bail out right now."

Top J.P. Morgan executives yesterday gently reminded employees not to gloat about their former rival's misfortunes. "As we now begin the important work of integrating the two firms, we are counting on you to embrace our new partners at Bear Stearns in a first-class way and ensure they feel welcome at our firm," wrote Messrs. Steve Black and Bill Winters, co-heads of the investment bank, in a memo to employees.

By tejasmarcos on Mar 18, 2008, 09:21 in Off Topic.

LDW says on Mar 18, 2008, 14:17:

I have to think that there are some partners at Deloitte & Touche who are not sleeping well these days. Deloitte Touche were the auditors of Bear Stearns, and that audit has recently switched over to Price Waterhouse Coopers (PWC).

Remember how Enron brought down Arthur Andersen? This Bear Stearns situation looks to be even bigger. Will this bring Deloitte & Touche down next? If it does, that would only leave 3 major accounting firms in the audit game (KMPG, PWC, and Ernst & Young). Before mergers and meltdowns, there were 8 major accounting firms at one point.

This would all be very sad, as most people at Deloitte & Touche are highly competent professional people, as were most of the people at Arthur Andersen. Sad how a screw up by one sector of the firm could have brought the whole thing tumbling down.

tejasmarcos says on Mar 18, 2008, 15:54:

leave it up to the leaders of the company to ultimately bring everybody down....

god is in your head

LDW says on Mar 18, 2008, 16:58:

Most partners in all the accounting firms mentioned are highly competent people. But that's the trouble with a professional partnerhip. All it takes is for one (or very few) of them to shit the bed in a big way, and it can bring the whole partnership down with them.

Many years ago there was a reputable mid-sized accounting firm (Laventhal and Horvath) that was taken down from the Savings & Loan clusterfuck of the late 70's and early 80's. It's not that the entire firm screwed up. It's because the partners were jointly and severally liable, which means one (or a very few) partner(s) could (and did) bring down the entire partnership.

Now the big accounting and law firms are organized into limited liability partnerships (LLPs). The idea there is to restrict civil action related to a particular client to the relevant engagement partner only, and not to the entire partnership.

Whether or not that is working I cannot say. Arthur Andersen still came tumbling down. They evaporated almost overnight.

Anyhow, I think it is fairly common practice amongst partners of such firms to put important family assets into the names of their spouses (or into IBC's...International Business Corporations based either in the Bahamas or the Cayman Islands) so that successful plaintiffs in civil actions cannot get their hands on them. Professional liability insurance is supposed to protect them from that kind of stuff, but I suppose that such insurance is not enough some times.

miamimike says on Mar 19, 2008, 23:24:

Many years ago there was a reputable mid-sized accounting firm (Laventhal and Horvath) that was taken down from the Savings & Loan clusterfuck of the late 70's and early 80's.
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Wasn't the Poster Boy of the S&L crisis back then none other then Brother Neil Bush? Now older brother George becomes the 2008 Poster Boy of the wall Street Credit Crisis, quite a Distinction for these two Brothers,,,LOL,,,TheApples don't fall far from the tree,,

As George W uttered a few years back ""Fool me once, shame on – shame on you. Fool me – you can't get fooled again!" - George W. Bush

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again." —President George W. Bush,

LDW says on Mar 20, 2008, 12:29:

Maybe it was Neil Bush. I can't remember, but it would not surprise me.