Bear Stearns: confidence game

For all their financial muscle, it’s amazing how vulnerable investment banks are. In the last 20 years, four major firms – Drexel Burnham, Salomon Brothers, Lehman Brothers and now Bear Stearns – have either been badly damaged or failed outright because they lost their creditors’ confidence. For Drexel and Solly, creditors had good reason to cut and run. The firm of Milken, Joseph and Black imploded in 1990 in an embarrassment of hung junk bond offerings and government prosecutions. Solly got s...