Before Lehman crashed, there was “The Bear.”
Bear Stearns, once the nation’s fifth-largest investment bank, had been a fixture on Wall Street since 1923 and had survived the crash of 1929 without laying off any employees.
But in 2008, its customers and creditors didn’t much care about its storied history. They were worried that the billions of dollars of mortgage-backed securities on its books weren’t worth what the company claimed. En masse, they stopped doing business with Bear.
Within a few days, on Monday, March 17, Bear was gone — subsumed into JPMorgan Chase & Co. with the help of the Federal Reserve for a price that was approximately the value of its shiny new Madison Avenue office tower alone.
Bear Stearns failed largely because it had spent the previous five years gorging on subprime mortgages in what appeared to be an ever-rising housing market. When home prices started falling and those loans started to go bad, Bear’s creditors got scared and pulled their money out of the investment bank.
The demise of the 85-year-old firm was just a harbinger of what was to come. Six months later, Lehman Brothers collapsed under the weight of its own mortgage securities, sending first the financial system, and then the entire global economy, into a tailspin from which it hasn’t yet fully recovered.
Five years later, the executives that were in charge of Bear’s headlong dive into the cesspool of subprime mortgage lending hold similar jobs at the most powerful banks on Wall Street: JPMorgan, Goldman Sachs, Bank of America and Deutsche Bank.