Episode 615 – Eddie Campbell
Miller Bear
Bear Stearns’ sale to JP Morgan was approved by shareholders yesterday. As a buildup to the vote, the Wall Street Journal ran an epic three-part article (1, 2, 3) chronicling the sudden collapse of BS. I know most of you aren’t as interested in the machinations of business and finance as I am, but I think Kate Kelly tells a pretty amazing story, not least because it supports my thesis that Miller’s Crossing can be used to explain almost anything.
In this case, I’d like to contrast this passage from Ms. Kelly’s series of articles —
The brokerage’s sudden fall was a stark reminder of the fragility and ferocity of a financial system built to a remarkable degree on trust. Billions of dollars in securities are traded each day with nothing more than an implicit agreement that trading partners will pay up when asked. When investors became concerned that Bear Stearns wouldn’t be able to settle its trades with clients, that confidence evaporated in a flash.
— with this moment when Tom Regan confronts crime-boss Leo with the precariousness of his position after the great Danny Boy scene:
Last night made you look vulnerable. You don’t hold elected office in this town. You run it because people think you run it. Once they stop thinking it, you stop running it.
I make light of it, but it’s truly frightening, how huge a role perception plays in finance. Once the loss of confidence is even a rumor, an 85-year-old company can collapse within days.
(You could argue that BS’s collapse was actually an internal rot that took several years to manifest itself, like an elderly cancer patient who puts of going to the doctor until it’s far too late. I don’t think there’s a Miller’s Crossing analog for that, but I can go check.)
Then there’s the great passage when JPM is negotiating to buy BS. JPM originally offered $8-$12 per share, then came back with an offer of $2 per share — the final price turned out to be $10/share, down from $131.58 last October — reminding me of Tom’s negotiations on the phone with Bernie Bernbaum, the shmatte kid:
I figure a thousand bucks is reasonable. So I want two thousand.
Seriously, I think these articles are pretty important, if you’re looking for perspective on how the seize-up in credit markets is impacting, um, everything in our day-to-day. If they’re registration-required, lemme know and I can e-mail them over to you.