March 18, 2008 6:49AM

Did He or Didn’t He?

By Cheryl Casone

How many times did we ask that question Monday! Did Alan Schwartz know what was going on at Bear Stearns when he went on LIVE television, and said we have no liquidity problems? Did he sit there, and blatantly lie to the viewers, the analysts, and his own employees? There has been oh, I don’t know, ten to twenty different opinions on this one. Wayne Rogers was on with myself and Liz Claman, and he said if he didn’t know, because let’s be honest, that is very possible, then he doesn’t deserve to be the CEO, and he is doing a bad job.

So, the other side of the coin: he knew, and he was out and about telling analysts behind closed doors that things were fine. He was setting up interviews with journalists, and saying things were fine. Do I believe that a CEO could do that? Sure! Enron anyone? Worldcom, or (insert 90’s corporate scandal here.) Do I believe in these days, in these times, that Schwartz did that? No, I don’t. I think he was on television Wednesday, and he realized Thursday that the market rumors were taking over, and other banks and hedge funds were pulling their trades, and asking questions later, or well, never actually.

How fast did the shareholder lawsuits start? Oh, let’s see, well, how about WITHIN 20 HOURS of the sale of Bear Stearns to JP Morgan having been announced! There was one suit confirmed, and another brewing. How many lawyers are foaming at the mouth? A lot. Did Stewart think that would happen? Um, yeah, I would say so. Alan Schwartz, I would certainly hope, is not that dumb, that he would lie through his teeth about the health of his company, when it was freefalling. And, quit saying Enron! I know, I know, I was there remember?

I think that he was trying to stop the rumors that probably had some basis, but were pretty much just that, rumors. I think traders got nervous, and they started to pull out and run like my cat does when someone comes after her. Macy usually takes off, then she comes back. And those same hedge funds will come back, they’ll just be coming home for dinner at JP Morgan and Company.

2 Responses to “Did He or Didn’t He?”

Comment by Jim Voorhees

March 18th, 2008 at 7:48 am

Schwartz did what any CEO should do, he defended his company. Remember Jimmy Stewart standing outside the Savings and Loan in Bedford Falls telling the customers that the compnay was strong and they’d get their money? What would you have Schwartz do? Tell everyone “we’re in a pickle here, if everyone tried to get their money out we be in Chapter 7 in 24 hours”. It was an old fashion bank run, pure and simple and JP got lucky.
Comment by joey45

March 18th, 2008 at 9:27 am

Frankly, at this juncture, we couldn’t say for sure whether he knew precisely what the state of his company was at the time. We could say that nervous investors will react to any rumor they hear. There seems to be no faith in the state of things. We’ve seen this before–many times. But we think we can assume some things.

Even if he didn’t know exactly what the state of Bear’s finances was, He knew that there were rumors flying, and wouldn’t he have known that if a deep sell-off started, that there just wasn’t enough liquidity to handle a major one that would threaten the company’s ability to handle it? What person in his position wouldn’t have tried to place some ‘cadmium rods’ in the reactor, in order to dampen the inevitable reaction going critical?

And the board–wouldn’t this sort of scenario have occurred to at least a few of them, even if not to Allen? How about their accountants? They, at least, should have known, and wouldn’t they have communicated the possibilities to all on a need to know basis? I don’t think, even for a minute, that SOMEONE there didn’t see the handwriting on the wall!

But that may not be the real question. Was this an attempt to defraud anyone? That’s not quite so clear to me. Did desperation drive the attempt, even if they knew the real danger? Do we know anything about the actions of Allan and the rest of the board, concerning what they’ve been buying or selling in their personal portfolios, leading up to this disaster? Can you give us some light on that?

Good blog…keep us informed.