Chapter 587 Bear Stearns Crisis
Speaking of which, Barron was still very grateful that Bonnie could remember to remind him to return to Chatsworth Manor this time.
On the night they returned to the manor, Barron and Bonnie went to visit the housekeeper Sean who was recovering from illness.
“Actually, I don’t have any big problems. It’s just that I’m old and I’ll be fine in a few days.”
Butler Sean looked at Barron and Bonnie with a very serious look. He was as happy as when he first welcomed the two of them back together at the door of the manor house.
That night, Butler Sean drank a glass of whiskey and fell asleep peacefully.
When Ramos came to his room in the morning to deliver breakfast, he found that Sean, the butler, had passed away in his sleep.
When Barron heard the news, he could hardly believe his ears, and Bonnie was immediately shocked.
After all, yesterday, although he seemed to be in poor spirits, Butler Sean could not tell that he was about to die...
In any case, things have happened. What is comforting is that Butler Sean passed away very peacefully, and Barron was able to meet him in his last moments.
Butler Sean dedicated most of his life to the Devonhill family. According to his wishes, he will be buried in the Devonhill family cemetery.
To a certain extent, Butler Sean can be said to be one of the links between Barron and the Devonshire family. After he came to this world, among the Devonshire family , the one he was most familiar with was Butler Sean, so he couldn't help but feel a sense of loss at this time.
……
On March 4, Bear Stearns, the fifth largest investment bank on Wall Street with an 85-year history, announced a serious cash shortage. On that day, the Federal Reserve decided to let the Federal Reserve Bank of New York Provide emergency funding to Bear Stearns, the fifth largest investment bank in the United States, through JPMorgan Chase Bank.
Bear Stearns was founded in 1923 and is headquartered in New York.
It is the fifth largest investment bank on Wall Street and a leading global financial services company that has provided high-quality services to governments, businesses, institutions and individuals around the world.
The company's main business covers institutional stocks and bonds, fixed income, investment banking, global clearing services, asset management and personal banking services.
In addition to the United States, Bear Stearns has branches in London, Tokyo, Berlin, Milan, Lijiapo, Yanjing and other places, with more than 10,000 employees worldwide.
In its 85 years of existence, it has created a record of profitability for 83 consecutive years.
But even one of the five major Wall Street investment banks that once had a glorious history was defeated by the subprime mortgage crisis at this moment...
In this bailout, Bear Stearns will receive a 28-day loan.
This amount was lent to Bear Stearns by the Federal Reserve through JPMorgan Chase, but the risk of the loan was borne by the Federal Reserve - this was the first time the Federal Reserve had loaned money in this way since the Great Depression of the 1930s. .
The reason why the loan must be given to Bear Stearns through JPMorgan Chase is because Bear Stearns does not have its commercial banking business like other investment banks, such as Goldman Sachs and Merrill Lynch.
Bear Stearns is actually a large brokerage firm that cannot obtain funds through the Federal Reserve's discount window and must use a commercial bank as an intermediary.
JPMorgan Chase was selected because it was one of the banks that suffered less losses from the subprime mortgage crisis. In addition, in the history of Wall Street, JPMorgan Chase has also had a history of taking on major responsibilities in times of crisis.
After the news came out, Bear Stearns' stock price fell 47% that day, closing at $30, reaching its lowest level in nine years, and the Dow Jones Industrial Index fell by nearly 195 points.
In fact, as early as last week, that is, starting on February 25, European banks had stopped conducting related transactions with Bear Stearns. At that time, this news panicked the market and investors sold financial products one after another. share.
On the last day of February, that is, February 29, the U.S. stock market began to circulate news that Bear Stearns might have a liquidity crisis.
Some Ameritrade fixed income and equity traders began withdrawing cash from Bear Stearns, fearing that their settlement funds would be frozen if Bear Stearns filed for bankruptcy. At the same time, several American media published rumors that Bear Stearns might fall into a liquidity crisis.
It was this sentence that caused Bear Stearns' customers and counterparties to doubt its ability to fulfill its obligations.
In this crisis-ridden and sensitive period, what could be more destructive than such suspicion?
So of course, there was a run on Bear Stearns, and cash flowed out like a stream that couldn't be stopped.
By March 4, a large number of hedge funds had finally drained the last drop of blood from Bear Stearns, and 17 billion US dollars had been withdrawn. It was because of the withdrawal of 17 billion US dollars that the rumors became It became a reality: Bear Stearns really had a liquidity crisis.
At the same time, its stocks listed in New York have plummeted. At this time last year, Bear Stearns' market value was as high as 20 billion US dollars!
Panic spread at an alarming rate, and as large amounts of money continued to flow out, Bear Stearns became helpless - Wall Street stopped trading with him, foreign exchange credit lines from counterparties evaporated, and banks withdrew.
By the end of the week, Bear Stearns was like a dying giant but with all his internal organs intact. If his blood supply was sufficient and his blood vessels were open, he could still be alive and well.
But in the financial world, there are no "ifs".
It can be said that Bear Stearns was drained of blood by its customers and died - the customer funds Bear Stearns was responsible for operating and clearing on November 30, 2007 were still as high as 288.5 billion US dollars.
But now Bear Stearns is on the verge of bankruptcy and can only rely on emergency financing from JPMorgan Chase and the Federal Reserve.
This is the efficiency of modern financial markets: the weakest link in the hinge is removed in an instant, resources are re-divided, and the entire system moves on.
Ironically, regarding Bear Stearns' crisis, many reports criticized its management's inaction.
While Bear Stearns was in solvency crisis, Kane, the chairman, chose to go to Detroit the previous weekend to participate in a bridge league - during which time he contacted Bear Stearns executives or other board members Very little.
By the time he returned to New York to personally take care of the business, other Wall Street peers had stopped assisting, and the Federal Reserve had been forced to provide emergency financing to Bear Stearns through JPMorgan Chase.
Another famous incident was that during a conference call to restore investor confidence on August 3 last year, he walked away in the middle of the meeting. This leader allowed his company to die.
Indeed, in the year since the subprime crisis, Bear Stearns executives have halfheartedly tried to reassure investors and other banks about their business.
Before giving up the CEO role to Alan Schwartz in January, Kane had been too lazy to communicate with the outside world.
They made no effort to reassure the outside world and let everyone know how things were going.
Until recently, Bear Stearns responded to growing doubts by issuing a tepid, detail-free statement declaring that it had no capital or liquidity question.
The comparison with them is Lehman Brothers...
Media reports praised Lehman Brothers for launching a series of difficult and well-planned operations after the subprime mortgage crisis broke out, allowing those who were shaken to rebuild their confidence.
And thinks they have taken more decisive action to stabilize its books - it has a cash buffer twice as large as Bear Stearns.
When Lehman Chief Financial Officer Erin Callan reported on a conference call last Tuesday, he poured out a series of data to prove the company's strength.
Well, at least for now, Lehman Brothers is still a "top student in the class"...
(End of this chapter)