Customer Reviews

Bear-Trap: The Fall of Bear Stearns and the Panic of 2008

5 star:		(12)
4 star:		(4)
3 star:		(3)
2 star:		(4)
1 star:		(4)

 

 

My previous one-star review of this book was removed by Amazon, along with another one written by a different reviewer. So keep in mind that AMZN actively removes some reviews.

I am a former (long time ago) Bear employee. While I will give credit (and one star) for the author's good explanations of Wall Street and some of the more exotic products, if you are looking for insight into the causes of the Bear collapse, you won't find them here. Other reviewers have stated correctly that you would be better off reviewing newspaper coverage of the events to learn what happened.

What I found interesting about this book is the complete lack of responsibility or culpability of a typical Wall Street trader in the financial collapse. Bill Bamber claims his firm was a "martyr for the sins of Wall Street" (chapter 10). That Bear Stearns was anything but a house of cards that employees were profiting handsomely off of while placing investor money at great risk is never made a case for. As the information has no depth other than any one else reading a newspaper would have, this book more supports that conclusion than refutes it.
I'd add that investors of Bear Stearns were also very poorly served by the firms employees, a group Bamber has very little sympathy for. Were the firm's employees really the unwitting dupes portrayed or the wizards of Wall Street they would like to think of themselves as?
This book is also poorly edited and redundent, I slogged through it only to justify my review.

Nothing new here. If one read the papers, he would be as informed as after finishing the book. Moreover, the author wants us to understand how intellectual he is by presenting historical facts which for the most part are irrelevant. And the whole discourse on being a "tragic hero" is just pitiful. I am not sure where the author is now, but I think he should stick to trading derivatives!

Bamber's objectives are to be excuse Bear Stearns management for the firm's collapse, while telling the story of its collapse. Unfortunately, he instead fills the book with irrelevant material and fails to accomplish either goal.

Bamber contends a 3/10/2008 rumor that Bear Stearns was having liquidity problems started the downward spiral, this was acerbated by short-sellers, and that Treasury Secretary Paulson wanted Bear to fail in retribution for its failing to assist in the LTC bailout ten years prior. Only one week later the firm was negotiating its sale to J.P. Morgan for $2/share.

Bear Stearns, like many others, believed housing prices would continue to go upward, and loaded two of its hedge funds with leveraged AAA and AA tranches of mortgage-backed CDOs, with default insurance provided by CDS. (The leverage was acquired by pledging each layer of CDOs for new borrowing to finance the next layer.) On 7/31/2007 both funds filed for bankruptcy. The declining value of its CDO collateral forced Bear Stearns to unwind the two hedge funds.

Funding for purchasing CDOs came from other Wall Street Banks and their investors - this avoided conflict of interest, double-dipping of fees, and left Bear free of credit concerns. The company only had one person overseeing the $20 billion involved because Bear had little money tied up in them itself; Bamber alleges the problems would not have occurred absent the "Chinese Wall" that existed between the hedge funds and asset traders. (Makes no sense to me.) Both fund managers were charged with fraud - talking the funds up publicly, while dumping their own shares and disparaging them in internal e-mails.

How Bear Stearns got from its 7/31/2007 hedge fund bankruptcy declaration to its 3/17/2008 takeover is not discussed. Another void is the allegation that J.P. Morgan went from its original $2/share offer to $10/share because it assumed Bear's obligations for a year - whether the deal went through or not. How this obligation was resolved is not covered either.

On an aside, readers do learn the Hank Paulson made $3.7 billion as a Goldman-Sachs fund manger in 2007 by betting the markets for home mortgages and CDOs would both decline. In a backdrop of such obscene profits it is impossible to feel sorry for any of the Bear Stearns principals in this tragedy.

My heart goes out to everyone at Bear, and the author here was first to get a book on this topic off the press. Unfortunately, it was written from the perspective of an "unconnected observer" of the events, and therefore lacks any credibility regarding "providing an insiders account". I got more info from reading the Financial Times than this book. It also shows the speed to rush this to the press because the number of typos in the book actually compelled me to return it to Amazon for a refund, aside from the fact that 80% of the way through the book, I still haven't read a single thing worth my dime. Why did I give 2 starts instead of 1? Because this author got the book out first. That deserves some recognition.

I bought this book with some trepidation, having lived the reality at 383, I wasn't sure any book would do Bear's demise any justice. What I hoped to get out of this book was a different perspective than those of my colleagues and I.

What I did not expect was such a poorly written and uninformed book. The editing is horrendous, with numerous spelling and grammer mistakes. There are also many statements in the book describing the business that could only be the product of someone who had not really worked in investment banking. There is not much about the crisis that wasn't covered in the press or that is particularly insightful.

In their zeal to get this out they focused on speed as opposed to quality and it shows. The book needed fact checking and editing - instead we are given a pretty rough draft.

The rating system requires that a reviewer give a book at least one star. A real shame because it is too generous with this book.

The author plays the victim card to the max. If only Bear Stearns received a capital injection all would be cured, says he. He completely overlooks the fact that the need for capital long pre-dated that last week plus of the firm's life. He glosses over that fact as well as the implications of the stunning implications of the 37 to 1 debt to equity that Bear had before the world changed. It's someone else's fault that the firm failed? Bear's capital would be wiped out if their assets declined in value by less than 3%. Think about that. THREE PERCENT.

And his discussion about how the decline in mortgage related securities was at the core of Bear's problems completely ignores the fact that Bear was itself a major player in the creation, sale and investment in these toxic securities.

So, at the end of the day, Bear lost it's capital because it held toxic securities it should have known better about, it acquired it with great gobs of borrowed money and was thinly capitalized. No where do you see that in this mess of a book.

The conspiracy theory that Bear was prevented from dealing with others at the end of it's life - especially foreign buyers who could complement their overseas operations with Bear's US presence - is pathetic. The stabilization of Bear precedent to its sale required a government based $30 billion loan through a bank. Does anyone believe that the US government could have or would have done so with a foreign entity whose finances it was unfamiliar with? Since the sale had to be achieved quickly to ensure that the contagion didn't spread through the system, a foreign acquirer was almost per se incapable of getting anything done over a weekend. Witness Barclay's desire to do something with Lehman in its last days, only to see it's own regulator say no.

And the philosophical analogues in this book goes on for pages ad in finitim. BORING - and an important and annoying tool in deflecting responsibility.

There are many other books that gives the full picture of Bear and it's fate. This one is to be avoided.

Ok so the author claims that rumor mongoring basically brought down Bear, Stearns which is definitely an over simplification. However the story is compelling and written in a free form narrative that feels intimate, like he's talking to you directly. The individuals involved and the reluctance of the finance community to help BS due to the LTCM issue is also told in an entertaining and probably truthful manner. For that snd the fact that its an easy read and compelling story I'm giving it a five.

Why did Bear Stearns fail and other investment banks equally leveraged survive? The author's story comes to the conclusion that it was matter of bad luck. Along the way to that conclusion he does a great job explaining in simple terms such things as HGX index, CDO, AAA-and AA tranches, LIBOR, CDS, LBO's and much more. To disprove this conclusion some expert would have to show that there was a fatal flaw within Bear Stearns that did not exist in any of the surviving investment banks.

Great book! I was excited to buy the book after hearing about it from friends who formerly worked at Bear. As someone with an interest in research on organizations that experience large-scale change, I was pleased to find the book both informative and entertaining. I loved the biting humor that appears throughout. I felt like I was right there with Bamber on the desk and it was great to relive the collapse from the inside!

I noticed that some of the negative reviews complained that Bamber did not seem to contribute new knowledge to that which we already heard in the media. I believe Bamber's purpose may have been misunderstood. Bamber did not claim to have worked in the asset management division or alongside the hedge fund managers. From my reading of the book, I understood his purpose to be more of a memoir of his experience as one of roughly 14,000 employees who worked at the Firm and whose life was affected by the crisis- and that I believe he accomplished well!