You know that there was a kid at Fordham who got offered the Bear Stearns summer intership in February, who turned the news on in March 2008 and was devestated. The prized internship...gone. Well now is his chance to get the shirt.
Bear Stearns collapsed in 2008 because it was massively overexposed to risky mortgage-backed securities tied to the U.S. housing bubble. In 2007, two of its hedge funds imploded under the weight of subprime mortgage losses, shaking confidence in the firm. Like many Wall Street banks at the time, Bear relied heavily on short-term borrowing to finance its operations, which left it extremely vulnerable when lenders and trading partners began doubting its solvency. Once housing prices fell and defaults surged, the securities on Bear’s balance sheet rapidly lost value, making the firm appear both highly leveraged and dangerously illiquid.
By March 2008, rumors of insolvency triggered a classic run on the bank: counterparties refused to extend credit, clients pulled their accounts, and Bear ran out of cash almost overnight. With its stock plunging and bankruptcy imminent, the Federal Reserve orchestrated a rescue by JPMorgan Chase, which acquired Bear Stearns in a fire sale for just $10 per share—down from a high of $170 the year before. The collapse marked the first major domino of the global financial crisis, exposing just how fragile the system had become under the weight of toxic mortgage debt and excessive leverage.
