Bear Stearns' fall - House of Cards

HOUSE OF CARDS

A Tale of Hubris and Wretched Excess on Wall Street

By William D. Cohan (468 pp. Doubleday. $27.95) (http://www.randomhouse.com/author/results.pperl?authorid=73897)

http://www.nytimes.com/2009/06/14/books/review/Lieber-t.html?ref=review

Cohan is a graduate of Columbia University Graduate School of Journalism and Graduate School of Business. He spoke at a recent Columbia alumni event. He had recently published this:

http://www.nytimes.com/2009/06/07/opinion/07cohanWEB.html

James Stewart was the interviewer at the event (http://www.journalism.columbia.edu/cs/ContentServer/jrn/1165270051276/JRN_Profile_C/1165270081398/JRNFacultyDetail.htm).

These fellows who get along in the business generally accept things, even when they don't agree with them. Charm is important. Cohan was more dyspeptic than the others on the stage. I liked him.

I'm reminded of three lessons we learned in the S&L debacle of the early 199o's.
First, when Congress changes the rules, the outcome is hard to predict and likely to be hurtful to many.
Second, the fellows running major financial institutions don't really know what they are doing.
Third, don't borrow short and lend long. That is, in essence, what Bear Stearns was doing by borrowing overnight and owning securities. People criticize the high amount of leverage at places like Bear Stearns, but you don't hear much criticism of the practice of lending long while borrowing short.

http://en.wikipedia.org/wiki/William_D._Cohan

Kate Kelly also has a book on the fall of Bear Stearns, called Street Fighters.

Here's a comment inspired by her book: http://www.theconglomerate.org/2009/06/larry-ribstein-on-street-fighters.html AND http://www.theconglomerate.org/2009/06/street-fighters.html