Confessions of a Wall Street Insider by Michael Kimelman

Author:Michael Kimelman
Language: eng
Format: epub
Publisher: Skyhorse Publishing
Published: 2017-03-02T05:00:00+00:00

“Does that say $2?” John asked the room.

“That has to be a typo, doesn’t it?” a nervous, high-pitched voice followed. “There has to be a zero missing, right?”

“But even $20 is ridiculous,” John said. “This can’t be right.”

“It’s not $20,” Jeff said, a little louder and more definitively than everyone else, trying his best to erase the stunned look on his face. “It’s $2.”

That was the end of it. Jeff would know.

He worked for Bear Stearns.

From a birthday party to a funeral in the time it took to check a Blackberry. I don’t know how much stock Jeff owned in his employer, but whatever he thought he was “worth” had probably just been cut by more than half.

Star Trek IV flashed through my mind: The Undiscovered Country. There was nothing else to compare this to. No precedent to call upon. This was a financial 9/11. Capitalism, efficient market theory, our entire regulatory structure—all said that what had just happened to Bear Stearns was impossible. A 100-year-old investment bank doesn’t go from being worth $50 billion one week to a couple hundred mil a few days later.

But it just did. They just had. All of us had seen it.

We were no longer simply in a recession. Something far more serious was unfolding before our eyes. This was an entirely different animal, and it was simply not possible to know what the fallout would be, or how or where it would take place. We were living in strange, dangerous times. Only one thing was certain: Very few of us—if any—would get out of this one without a good deal of pain.

I thought about the coming week at work, and that was all I saw. Pain, and a lot of it. Stocks, commodities, P&Ls—all flashing red, all draining money out of the pockets of traders and investors worldwide. The collapse of Bear was either going to be the dramatic “thud” that creates a bottom—as Zvi and many others were arguing—or the beginning of the end for life as we knew it. Nobody had a grasp anymore on what was happening, or on what it all meant. This was uncharted territory: the place on the map “where dragons lie.”

The Undiscovered Country.

I kept asking myself the same questions. Who bought the Bear Stearns puts? Who made hundreds of millions of dollars while Bear collapsed? Was it Goldman? If not them … who?

Whenever there’s a rumor or conspiracy suggesting skulduggery, fingers always seem to get pointed at Goldman first. As the most powerful and ethically challenged of all the ethically challenged banks, Goldie was permanently parked in a gray zone and the ideal bogeyman. But that didn’t necessarily mean they were always the culpable party.

Whoever was shorting Bear off the initial bump from the headline and press release knew a lot more than the public. The press release didn’t tell you that Hank Paulson had given JPM the weekend to come up with a deal, but was quite prepared to write Bear’s obituary otherwise. Someone knew, though.

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