Willaim Cohan on the Life and Death of Bear Stearns

EconTalk

Library of Economics and Liberty

Ethics, Philosophy, Economics, Books, Science, Business, Courses, Social Sciences, Society & Culture, Interviews, Education, History

4.7 • 4.3K Ratings

🗓️ 28 September 2009

⏱️ 65 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

William Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Steet, talks with EconTalk host Russ Roberts about the life and death of Bear Stearns. The discussion starts with how Bear Stearns and other Wall Street firms made money and how they financed their operations. The conversation then turns to the collapse of Bear Stearns's hedge funds in the summer of 2007 and how that collapse and the firm's investments in subprime mortgages led to the death of the firm in March of 2008. Cohan explains the role of borrowed money in the financial crisis and Bear Stearns in particular. The conversation concludes with the incentives facing Wall Street executives and the price they paid or didn't pay for the gambles they made with other people's money.

Transcript

Click on a timestamp to play from that location

0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links
0:26.4	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you.
0:36.8	Today is September 22nd, 2009, and my guest is William Cohen. Wall Street veteran turned
0:44.8	author. His latest book is House of Cards, a tale of hubris and wretched excess on Wall
0:50.3	Street. Bill, welcome to Econ Talk.
0:53.3	Thank you for having me, Russ.
0:55.3	Our subject today is the subject of your book, House of Cards, the life and death of Bear
0:59.3	Stearns. We just had the one-year anniversary of the bankruptcy of Lehman Brothers, which many
1:04.3	people view as the beginning of the crisis. But for me, the beginning of the crisis was March 17,
1:09.3	2008. When we read that Bear Stearns had been forced into a marriage with JP Morgan Chase,
1:14.3	with the Fed and Treasury as matchmaker. I want to talk about those events and what led up
1:20.3	to that, which you did so colorfully chronicle in your book. Before we get there, though, I want
1:24.3	to start with some basics. Bear Stearns was a complicated creature, especially for those
1:29.3	of us outside of Wall Street watching from a distance. What was it doing? What does an investment
1:37.3	bank like Bear Stearns do? How does it make its money, and where does it get its funding
1:41.3	from?
1:43.3	All very good questions. If you strip it down to investment banks are in a surprising
1:52.3	number of businesses. Like most complicated big companies, in case of Bear Stearns, they
2:03.3	had at various times an asset management business where they would manage people's
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from Library of Economics and Liberty, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of Library of Economics and Liberty and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.