Gary Parr, vice chairman of Lazard Fr res & Co. and Kellogg class of 1980 could not believe his ears. “You can not mean that,” he said, in response to the lowered supply given by Doug Braunstein, JP Morgan, head of investment banking for Parr client, the legendary investment bank Bear Stearns. Less than 18 months after the close of trading at an all time high of $ 172.61 per share, Bear now had no choice but to accept Morgan humiliating $ 2 per share, Federal Reserve-sanctioned bailout deal. “I have to … Read More»

Gary Parr, vice chairman of Lazard Fr res & Co. and Kellogg class of 1980 could not believe his ears. “You can not mean that,” he said, in response to the lowered supply given by Doug Braunstein, JP Morgan, head of investment banking for Parr client, the legendary investment bank Bear Stearns. Less than 18 months after the close of trading at an all time high of $ 172.61 per share, Bear now had no choice but to accept Morgan humiliating $ 2 per share, Federal Reserve-sanctioned bailout deal. “I must get back to you.” Hang the phone, Parr sat back and gave a weary sigh. Rumors had swirled about Bear imploded since two of its hedge funds as a result of the subprime mortgage crisis, but always bear the Scrappy appeared to have weathered the storm. Parr was to find efforts to recapitalization of the bank in long discussions and marathon due diligence sessions led, but one by one, potential investors was gone, fear moved partly by substantial mortgage Bear’s holdings at a time when every bank Wall Street was reducing their positions and massive depreciation in the asset class. In the past week the rumors had reached a climax, with financial analysts openly questioning Bear ability, operations and its clients for the outputs on. Now Sunday afternoon it had been a long weekend, and it would be a long night with some certainty how the incriminating Fed-backed bailout of Bear negotiations would require, prior to market open on Monday. The next morning, would the eighty-five-year-old investment bank that had survived the Great Depression, the savings and loan crisis, and the dot-com implosion, no longer exist as an independent company. Pause briefly before calling CEO Alan Schwartz and the rest of the board of Bear Parr allowed a moment of reflection. How had all this happened?
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from
David P. Stowell
Evan Meagher
Source: Kellogg School of Management
25 pages.
Release Date: 6 March 2009. Prod #: KEL378-PDF-ENG
Investment Banking in 2008 (A): The Rise and Fall of Bear HBR case solution