While pundits and politicians still try to figure out what went wrong at Bear Stearns, Kate Kelly of The Wall Street Journal writes that many industry insiders simply feel the company failed to take advantage of a number of opportunities to save itself. Months before regulators pressured the firm to sell itself, Kelly writes, nervous traders futilely begged CEO Alan Schwartz and his predecessor, James Cayne, to raise more cash and slash Bear Stearns's huge inventory of mortgages and the bonds that backed them.
At least six efforts to raise billions of dollars -- including selling a stake to leveraged-buyout titan Kohlberg Kravis Roberts & Co. -- fizzled as either Bear Stearns or the suitors turned skittish, she says. And repeated warnings from experienced traders, including 59-year Bear Stearns veteran Alan "Ace" Greenberg, to unload mortgages went unheeded.
Kelly reports that top executives resisted, in part, because they were concerned the moves would upset the delicate calculus of appearances and perceptions that is as important on Wall Street as dollars and cents. If Bear Stearns betrayed weakness, they worried, skittish customers would pull their money out of the firm, and other financial institutions would refuse to trade with it.
Instead of managing these fickle forces, she writes, a brokerage whose culture and fortune were rooted in the trading floor's steely manipulation of risk was swamped by them.