Horrified traders soon grasped the reality: the Fed had been forced to
throw out four decades of monetary history in order to support Bear
Stearns. Its justification was not that Bear was too big but that it
was too "interconnected" to be allowed to fail with the markets in such
as fragile state.This is a fascinating tale of just how
serious the Bear Stearns event was and the political and financial
machinery that was brought to the table to sculpt a solution.
Schwartz, who had taken over the helm from Cayne in January, knew that
without an immediate cash injection the 85-year-old institution, which
had survived the Great Depression, was bust.
He called his key adviser, Gary Parr, the deputy chairman of Lazard and
one of a handful of men on Wall Street able to raise serious cash at
One of his first calls was to Jamie Dimon, the chairman and chief
executive of JPMorgan. Once Dimon heard the extent of Bear Stearns’s
difficulties, it was clear he would have to help somehow.
The President, George Bush, was notified and Chris Cox, the chairman of
the Securities & Exchange Commission, was put on alert. Calls were
made to Tim Geithner, the president of the New York Federal Reserve,
and Ben Bernanke, the chairman of the Fed. The men gathered their teams
and began trying to work out how they would react.