'Adequately capitalized' Bear Stearns taken down by 'rumors'
In his opening statement during last week's Senate Banking Committee hearing, Bear CEO Alan Schwartz claimed that in the days leading up to the Fed-financed bailout of his firm, Bear was "adequately capitalized", had a "substantial liquidity cushion", and that "our balance sheet, liquidity and capital were strong".
He then went on to explain how "unfounded rumors and attendant speculation" traveling at "unprecedented speed" left him no choice but to sell his company for pennies on the dollar to a rival firm on a Sunday evening.
One wonders what Mr. Schwartz considers to be adequate capitalization and a substantial liquidity cushion if neither can protect his firm from a few days of speculation driven by unfounded rumors?
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