Liquidity Risk Management Case Study: The Bear Stearns Liquidity Run: Timelines
Liquidity Risk Management: Bear Stearns Liquidity Run Case Study Timelines
20 December 2007: BS records 4th quarter loss, writes down mortgage assets of $1.9 billion. Sued by Barclays for misleading hedge fund performance
28 December 2007: Employees sell BS stock worth $ 20 million
Early January 2008: CEO James Cayne resigns. Moody’s downgrade of MBS tranches issued by BS
Mid-January 2008: Over 20% fall in BS share price
7 March 2008: Shares of Carlyle Capital Corporation (CCC), to which BS has significant exposure, suspended because of margin calls and defaults notices by lenders. Triggers concerns regarding liquidity
10 March 2008: BS Press Release to reassure investors that liquidity concerns are false. Rumors of loss of confidence and cancellation of credit facilities.
11 March 2008: CFO says rumors false. Goldman Sachs says it will not stand in for it clients if they wished to undertake derivative deals with BS
12 March 2008: CEO says no liquidity crisis on CNBC and that quarter will show profit. Banks withdraw credit lines and clients stop using BS brokerage
13 March 2008: CCC hedge fund collapses. BS share price falls 17%. CEO announces all is well. Liquidity falls from $17 billion to $2 billion.
13 March 2008: CEO approaches JP Morgan for rescue package and clients to express confidence in BS publicly. Latter declined.
14 March 2008: BS says JP Morgan with Fed Reserve has agreed to provide funding. Share price falls 40%. S&P and Moody’s cut BS ratings
16 March 2008: JP Morgan announces that they have acquired BS for $2 per share