Rise and Fall of the Bear
Case 1: Investment Banking – Rise and Fall of the Bear
Table of Contents
Failure Analysis
Identify the major factors that contributed to Bear Stearns failure?
Who stood to benefit from its implosion?
How did Bear Stearnss collapse differ from the ‘Long Term Capital Management failure a decade earlier?
What could Bear Stearns have done differently to avoid this fate?
1.4.1.
In the early 2000s?
1.4.2.
And during the summer of 2007?
1.4.3.
And during the week of March 10, 2008?
Liquidity Crisis and Business Model of Investment Banks
What is the role of Liquidity for banking and investing banking firms?
Is perception of Liquidity more important for a banking/investment banking firm than manufacturing firms (such as Ford or Boeing)? Why?
What could Bear Stearns have done to address its Liquidity concerns, which initiated the run on the bank?
Looking back, what lessons can we infer from Bear Stearnss failure regarding the business model of investment banks?
Looking forward is the concept of ‘pure-play” investment banks sustainable?
Systemic Banking Crisis and Regulation
What is a “systemic banking crisis”?
What is ‘banking contagion”?
What was the rationale for the creation of ‘fire-wall of separation between investment banking and commercial banking in USA that was institutionalized by the Banking Act of 1933?
Why did the regulators weaken and phase out that ‘fire-wall of separation in 1990s?
Identify the major Deregulatory Acts and its role in the meltdown of the investment banking industry?
In your opinion, based on lessons from past global banking crisis, what steps should regulators institute now to address similar future problems?
Federal Bailout and Public Policy
Why did the Federal Reserve bail-out Bear Stearns?
Why was Lehman Brothers allowed to collapse while Bear Stearns was not?