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BOOK REVIEW

A chronicle of the collapse of a scrappy Wall Street firm

By 1998, Alan Greenberg had been chairman, CEO, or chair of the executive committee at Bear Stearns since 1985. By 1998, Alan Greenberg had been chairman, CEO, or chair of the executive committee at Bear Stearns since 1985. (Associated Press/File 1998)
By Claude R. Marx
Globe Correspondent / July 10, 2009
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The excesses on Wall Street that helped cause the current recession have been diagnosed in great detail in the media and in the halls of Congress. Many of these analyses have been long on finger pointing and fiery rhetoric and short on insights that help readers understand what happened and how to avoid similar mistakes.

Wall Street Journal reporter Kate Kelly has done the literary equivalent of looking under the hood of one of the firms that was at the center of much of the financial action. The result is “Street Fighters,’’ an almost blow-by-blow account of three extraordinarily dramatic days in the nation’s financial history during March 2008. Kelly has expanded a series she wrote for the newspaper, yet unlike similar undertakings, this one isn’t too long nor is the author guilty of trying to be overly Faulknerian in her prose. Kelly’s writing style is elegant and engaging. It enhances, rather than gets in the way of, the story.

Bear Stearns was a successful and not particularly beloved investment firm that throughout its history was known for its sharp elbows and scrappy and non-button-down culture. (Its former CEO Alan “Ace’’ Greenberg once said that his ideal hire was a PSD: someone who was poor, smart, with a desire to get rich.)

Those traits caused some of Bear Stearns’s rivals to be happy enough when the firm’s financial woes - caused by its own risky behavior and the bad economy - brought it to a point of desperation where it needed to find a buyer or declare bankruptcy. For example, months before the end, several of its top executives advised the firm’s leaders to sell some of its toxic mortgages.

Kelly describes how the personality clashes among Bear Stearns’s top executives helped doom the firm, as did the fact that many of its top leaders were often quite disengaged. The chairman (and ousted CEO) Jimmy Cayne, for example, was smart, brash, and mercurial, and his penchant for long vacations (during which he often played in bridge tournaments) and occasional marijuana use, according to Kelly, added to his larger-than-life image.

“For years, these situations remained mostly under wraps, as Bear and its CEO remained feared and admired. But as the housing boom showed its first sign of strain, Cayne’s foibles seemed less amusing,’’ she writes.

While Kelly’s profiles are insightful, the best parts of the book are her behind-the-scenes accounts of the negotiations between Bear executives and potential suitors and government officials. Treasury Secretary Timothy Geithner, who at the time was president of the New York Federal Reserve, comes across the best. He was analytical, smart, and forceful without being belligerent, she writes. While he was eager to find a buyer for Bear, during the discussions he proved to be the voice of reason and an honest broker who pushed things along while letting others think much of what happened was their idea.

J.P. Morgan Chase chairman and CEO Jamie Dimon also comes across well. He was initially reluctant to buy Bear Stearns and was adamant in his position. However, Federal Reserve Board chairman Ben Bernanke and then-Treasury Secretary Henry Paulson worked hard to sweeten the deal, including $30 billion of special financing from the Fed to compensate Chase for buying Bear’s less-liquid assets. The initial deal called for a purchase price of $2 per share. After Bear shareholders complained, it was increased to $10 per share, or $1.2 billion. That amount was still far lower than the shares’ peak value, but it was better than the alternative: bankruptcy.

The saga of Bear Stearns’s collapse contains high drama and high finance and offers a great vantage point for understanding part of the economic downturn. Kelly is a first-rate chronicler of these events, producing a book that’s informative and engaging.

Claude R. Marx is an award-winning journalist who has written extensively on political and business subjects.

STREET FIGHTERS: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street By Kate Kelly Portfolio, 247 pp., $25.95

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