Sense on Cents

Was the failure of Bear Stearns a function of excessive greed, poor risk management, a weak Board, a lack of diversity in business lines, or all of the above?

Having worked at Bear Stearns from 1990-1996, I have a real appreciation for the depth of penetration William D. Cohan brings to this enormous failed enterprise in his book, House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.

Cohan does an excellent job in capturing the culture of Bear. What were the key points within the culture? In my opinion . . .

1. Everything (including principles) was secondary to maximizing profits each and every day

2. Silo mentality promoted a lack of teamwork and allowed ‘people without principle’ to advance as long as they generated profits.

3. As people progressed and careers grew, senior management openly promoted individuals to ‘have at it’ in order to move forward.

4. The most senior management at Bear ultimately did not fulfill their responsibility of protecting shareholder interests. Why? They were totally consumed with maximizing their own wealth. On Wall Street, it is often said, there are bulls, bears, and pigs. At Bear Stearns, certain senior managers fell into the pig category. (more…)