My heart bleeds for Bear Stearns CEO Alan Schwartz. Until today we had not considered Bear Stearns a victim. However, Mr. Schwartz points out that if the Fed had instituted aggressive liquidity facilities earlier, Bear could have been saved or at least have been sold for a more realistic price. Shame on you Ben Bernanke. It is all your fault for not saving Bear sooner.
I suppose it was Mr. Bernanke's fault that Bear was over thirty-times leveraged? I suppose it is Mr. Bernanke's fault that risk management and oversight was non-existent and that Bear management fiddled while Rome burned. Bear's counterparties became wary of Bear's ability to fulfill its obligations and walked away. How is this the Fed's fault? It isn't.
The bottom line is that Bear should never have been in this situation to begin with. Management and only management should be held responsible. Management is responsible for a firm's viability, not the Federal Reserve Bank!
Bear management is not alone. We are seeing problems at UBS, CIT, AIG and two large financial firms which report "earnings" this month. Management was derelict in their duties in all the aforementioned examples. If not for the ramification for the U.S. economy, the Fed should step back and let management work their ways out of this mess. Wait until CDS counterparty risk becomes a problem.
Mr. Schwartz, you are the problem. You had better thank heaven that The Fed and Jamie Dimon bailed your ass out as well as the have. Maybe Congress should investigate you and the intrepid Mr. Cayne.
No comments:
Post a Comment