R.R. Donnelley

1

• R.R. Donnelley
• SEC Hot Topics Seminar
• The Failure of Bear Stearns and
• the Resulting Impact on the
• Regulation and Oversight
• of the Financial Markets

Michael A. Saslaw Weil, Gotshal
MangesRichard L. White Weil, Gotshal
MangesWarren W. Garden Block Garden,
LLPRick Lacher Houlihan Lokey
September 15,2008
2

• Timeline of the Rapid
• Collapse of Bear Stearns

3

• Bear Stearns Timeline
• Fall 2006
• The U.S. housing market begins to exhibit signs
  of trouble, as record home appreciation stalls,
  foreclosures rise and lending slows.
• One hedge fund managed by Bear Stearns Asset
  Management (BSAM) begins to experience
  significant difficulties instead of taking
  ameliorative action, BSAM forms a second, similar
  hedge fund with approximately three times the
  leverage of the original fund both funds
  continue to invest in derivatives linked to the
  U.S. housing market.
• Summer 2007
• Bear pledges 3B to bail out the two hedge funds
  managed by BSAM.
• Rumors begin to circulate that Bear may have
  liquidity problems and may have to file for
  bankruptcy.

4

• Bear Stearns Timeline (contd)
• Fall 2007
• Numerous investment banks report mortgage related
  multi-billion dollar write-downs .
• Nervous traders at Bear plead with management to
  raise capital.
• Bear explores, but ultimately does not consummate
  potential capital infusion transactions with KKR,
  J.C. Flowers and J.P. Morgan. A potential
  transaction with Warren Buffett fails to
  materialize.
• SEC regulators begin to hold weekly conference
  calls with Bear executives to ensure Bear has
  sufficient liquidity resources to fund its
  trading operations.

5

• Bear Stearns Timeline (contd)
• November and December 2007
• Bear posts a quarterly loss, the first since its
  inception in 1923.
• Merger discussions with hedge fund Fortress
  Investment Group ultimately fail.
• Following talks with Bear management, Pimco
  Investments, a major Bear customer, agrees to
  delay unwinding numerous multi-billion dollar
  trades, but provides Bear with an ominous warning
  You need to raise equity.

6

• Bear Stearns Timeline (contd)
• January 2008
• Reports of an inattentive and disinterested
  management style result in the ouster of Bears
  CEO, Jimmy Cayne. Cayne is replaced by new CEO
  Alan Schwartz.
• Rumors regarding Bears financial health and
  potential liquidity continue to circulate,
  although Bear reports a quarterly profit in
  February 2008.
• March 7, 2008
• Alan Schwartz flies to Palm Beach to prepare for
  Bears annual media conference and begins to
  receive reports of new rumors regarding Bears
  troubled financial health and waning liquidity.

7

• Bear Stearns Timeline (contd)
• March 10, 2008 (Monday)
• Rumors that Bear is having liquidity problems
  circulate in the market. At the time, Bear had
  approximately 18B in cash reserves.
• A few lenders begin to inform Bear that overnight
  loans scheduled to expire will not be renewed.
• The trading volume for Bears stock explodes
  total volume exceeds 50M shares, while volume on
  a typical day is 7M shares.
• Rumors and speculation rocket through the markets
  and are broadcast on various financial news
  networks. One commentator perceptively notes
• Someone is always making money on the other side
  of that bad news or that rumor.
• Bear releases a statement at the end of the
  trading day denying liquidity problems.

8

• Bear Stearns Timeline (contd)
• March 11, 2008 (Tuesday)
• The Federal Reserve announces a new securities
  lending program for major Wall Street firms to
  assist them with disruptions caused by the credit
  crisis.
• Large numbers of novation requests (requests for
  a substitute entity to step in and bear
  counterparty risk on the other side of a trade)
  from counterparties to trades with Bear flow into
  numerous Wall Street banks, including Goldman
  Sachs, Deutsche Bank and Credit Suisse.
• Because of the sheer number of requests, traders
  at certain firms are told to await credit
  department approval before proceeding with
  additional novations of contracts with Bear.
  Rumors continue to abound on trading floors
  throughout the day.
• Following leaks of the news that certain
  investment banks are refusing novation requests
  involving Bear, numerous hedge funds pull money
  from Bear. Many of Bears daily lenders, which
  provided the firms liquidity needs, tell Bear
  they will not renew expiring loans.

9

• Bear Stearns Timeline (contd)
• March 12, 2008 (Wednesday)
• Alan Schwartz appears on CNBC and denies the
  existence of liquidity problems at Bear however,
  withdrawals by hedge funds continue to
  accelerate.
• Several repo lenders those who lend day to
  day based upon pledged collateral inform that
  loans will not be rolled over the next morning.
• Bears cash reserves are reduced to less than
  15B.
• Alan Schwartz instructs Bears outside counsel to
  discuss Bears financial situation with the
  Federal Reserve. Bears counsel urges the
  Federal Reserve to accelerate its plans to
  introduce additional liquidity into the market
  and to also exercise its power to lend cash
  directly to investment banks.
• Had the Federal Reserve allowed direct lending to
  investment banks on March 12, 2008, Bear could
  have used its inventory of mortgages,
  mortgage-backed securities and other securities
  as collateral for borrowings.
• The cost of a five-year policy to protect against
  default on 10M of Bears debt skyrockets to
  655K two to three times the price of similar
  insurance on the debt of Bears rivals. Two
  weeks before, the cost of such a policy had stood
  at 300K.

10

• Bear Stearns Timeline (contd)
• March 13, 2008 (Thursday)
• Major hedge fund clients of Bear withdraw their
  cash holdings. Bears repo lenders, among
  others, refuse to extend or roll over loans to
  Bear the next day.
• Bears cash reserves began the week at
  approximately 18B by the end of the day, cash
  reserves had been reduced to approximately 3B,
  an insufficient amount of cash to fund Bears
  trading operations the next day.
• Bears only options at the opening of business
  the next day were (i) a bankruptcy filing or
  (ii) an emergency cash infusion.
• Alan Schwartz discusses Bears bleak financial
  situation with the Federal Reserve, the SEC, the
  Treasury Department, and J.P. Morgan (among other
  potential suitors).
• The solution announced at the opening of the next
  business day is that J.P. Morgan will provide a
  liquidity facility to Bear for up to 28 days.
  The cash infusion indirectly comes from the
  Federal Reserve through J.P. Morgan however, the
  risk of the loan is borne by the Federal Reserve.

11

• Bear Stearns Timeline (contd)
• March 14, 2008 (Friday)
• Following the announcement of Bears new
  liquidity facility from J.P. Morgan, the market
  took several hours to process the news.
• However, by the end of the day, all of Bears
  cash reserves are depleted as hedge funds and
  other clients accelerated their withdrawals.
• Bears stock opened the day with a trading price
  of 54.24 per share. Just as hedge funds and
  clients were withdrawing their money from Bear,
  investors also participated in a rapid sell off
  of Bears stock. Bears stock closed at 30.00
  per share.
• Treasury Secretary Paulson, after seeing the
  events of the trading day, informs Alan Schwartz
  that the Federal Reserve will not provide
  liquidity for Bear on Monday and that Bear had
  the weekend to finalize a merger or capital
  infusion transaction.

12

• Bear Stearns Timeline (contd)
• March 15, 2008 through March 23, 2008
• J.P. Morgan and J.C. Flowers conduct around the
  clock due diligence to attempt to piece together
  a deal for Bear.
• J.P. Morgan initially informs the Federal Reserve
  and Bear that it cannot consummate a transaction
  because of the enormous risks in Bears
  portfolio.
• Following discussions between the Federal
  Reserve, Treasury Secretary Paulson and J.P.
  Morgan CEO Jamie Dimon, J.P. Morgan proceeds with
  a merger agreement to acquire Bear, valuing Bear
  at 2 per share.
• As part of the transaction, the Federal Reserve
  agreed to guarantee up to 29B of certain of
  Bears securities in the event of a default by
  Bear.
• The next week, following massive protest by Bear
  shareholders and the discovery of certain errors
  in the original merger agreement signed by the
  parties, Bear and J.P. Morgan agree to increase
  the offer price per share to 10 per share.

13

• Bear Stearns Timeline (contd)
• Stock Price Chart Depicting the Rapid
  Deterioration of Bear Stearns

14

• Significant Factors Contributing to the Failure
  of Bear Stearns
• A crisis of confidence enveloped Bear Stearns in
  March 2008 and ultimately resulted in the
  evaporation of Bears liquidity resources and,
  consequently, its business. While no one has
  been able to point to a specific event or action
  as the ultimate cause of Bears demise, many
  experts point to several factors
• Rumors in the financial markets
• Naked short selling
• Rapid rise in activity involving credit default
  swaps (CDS)
• Delayed opening of the Federal Reserves Primary
  Dealer Credit Facility

15

• Rumors in the Financial Markets
• False rumors can lead to a loss of confidence in
  our markets. Such loss of confidence can lead to
  panic selling . . . During the week of March 10,
  2008, rumors spread about liquidity problems at
  Bear Stearns, which eroded investor confidence in
  the firm.
• SEC Emergency Order, Release No. 58166 / July 15,
  2008
• Current Rules Governing Rumors
• Disseminating false rumors about a security can
  potentially result in liability under both the
  Securities Act of 1933 and the Securities
  Exchange Act of 1934, with liability most
  frequently attaching under Section 10(b) of the
  Exchange Act and Rule 10b-5 promulgated
  thereunder.
• Broker-dealers are also subject to
  Self-Regulatory Organization (SRO) Rules, which
  prohibit the spreading of false rumors by member
  entities.
• See NASD Rule 5120(e) and NYSE Rule 435(5).

16

• Rumors in the Financial Markets (contd)
• Previous Regulatory Efforts
• The SEC has the power to bring fraud actions
  under Rule 10b-5 against any person who makes
  any untrue statement of a material fact in
  connection with the purchase or sale of a
  security. While this principle has not been
  officially sanctioned by law or court
  interpretation to apply to someone merely giving
  advice or expressing opinions regarding a
  security, the SEC has argued for such an
  interpretation.
• In several cases dating back to the 1990s, the
  SEC charged private individuals with violations
  of Rule 10b-5 for circulating false rumors via
  the internet (or for failing to disclose their
  positions in such securities when making free
  recommendations on such securities).
• In response to critical analysis and false rumors
  distributed via the internet, it should also be
  noted that many public companies have commenced
  private litigation against the purported sources
  of such rumors as well as those providing
  critical analysis. Increasingly, hedge funds and
  pure short sellers are the targets of such
  litigation.
• In fact, since 1989, the SEC has brought at least
  three cases against individuals for spreading
  materially false negative information regarding
  an issuer with whom such person had no
  relationship or duty with at least one case
  resulting in a conviction and consent to an
  injunction in a civil proceeding.
• See SEC v. Moldofsky, SEC Litig. Rel. No. 16493
  (Mar. 30, 2000).

17

• Rumors in the Financial Markets (contd)
• Previous Regulatory Efforts (contd)
• Based upon previous cases brought by the SEC, it
  appears that the SEC interprets Section 10(b) of
  the Exchange Act and Rule 10b-5 promulgated
  thereunder to require all persons even an
  individual, unregulated person to be truthful
  when publicly giving free advice, espousing
  opinions on securities or otherwise disseminating
  information regarding securities.
• While the SEC seems to have taken an aggressive
  position on the issue, many securities law
  experts believe the SECs position is an
  extremely aggressive reading of the Exchange Act
  and the rules promulgated thereunder.
• Moreover, notwithstanding the legal correctness
  of such a position, practical difficulties exist
  in finding credible evidence linking individuals
  to demonstrably false rumors (in addition to
  proving scienter).

18

• Rumors in the Financial Markets (contd)
• Recent SEC Efforts to Combat the Spreading of
  Rumors
• Increased use of subpoenas by the SECs Division
  of Enforcement, with targeted subpoenas to hedge
  funds, investment banks and broker-dealers.
• On July 13, 2008, the SEC announced it was
  expanding an existing program of examinations of
  registered broker-dealers and investment advisers
  aimed at the prevention of the intentional
  spread of false information intended to
  manipulate securities prices.
• In conjunction with increased SEC examinations,
  the Financial Industry Regulatory Authority
  (FINRA) and NYSE Regulation, Inc. have advised
  members there will be increased investigations
  and examinations.
• Finally, despite its questionable legal
  acceptance, enhanced vigilance and action by the
  SECs Division of Enforcement is expected to
  address the spreading of false or materially
  misleading rumors via the internet.

19

• Short Selling and Naked Short Selling
• What is Short Selling?
• Widely considered to be a legitimate trading
  strategy, a short sale occurs when a trader
  borrows stock and then sells it, in hopes that
  the price of the stock will fall. If the stock
  price falls, the trader repurchases the stock in
  the open market at the lower price, returns the
  stock that was borrowed, and then keeps the
  resulting spread as profit.
• In addition, many short sellers do not
  necessarily desire a market price decrease but
  instead utilize short positions as part of a
  hedging or arbitrage strategy relating to
  existing long positions. One example is an
  arbitrage strategy utilized in certain Private
  Investment/Public Equity (PIPE) transactions.
  In such transactions, hedge funds often purchase
  the PIPE long and at a discount, short the
  underlying stock, and then capture the spread
  on such positions.
• SEC rules and regulations support legitimate
  short selling, as the practice helps to transmit
  price signals to the market in response to
  negative information or other information
  regarding the prospects of listed companies.
  Moreover, as Chairman Christopher Cox recently
  noted, short selling helps prevent irrational
  exuberance and bubbles.
• What is Naked Short Selling?
• Essentially, a naked short sale is the same as a
  short sale transaction, except that a trader does
  not take steps to borrow the stock before
  executing the short sale. An investor who
  shorts a stock without first pre-borrowing or
  owning such stock conducts a naked short sale and
  such an action is illegal if done intentionally.

20

• Short Selling and Naked Short Selling (contd)
• Current Rules Governing Short Sales
• In 2004, the SEC adopted Regulation SHO to
  address the problem of naked short selling.
• Regulation SHO requires broker-dealers, before
  accepting a short sale order or effecting such
  order in their own account, to either
• (i) borrow the security that is to be shorted or
• (ii) enter into a contract to borrow the
  security.
• However, Regulation SHO contains an alternative
  to the two requirements noted above and a short
  sale may still be effectuated if the
  broker-dealer has reasonable grounds to believe
  that the security can be borrowed. It has been
  argued that the reasonable grounds exception
  creates an opportunity to evade the rules
  purpose and effect naked short sales by
  purposefully misleading or lying regarding
  whether a trader has borrowed a stock.
• Additionally, following its amendment in 2004,
  NASD Rule 3370 requires that a NASD
  broker-dealer, prior to accepting a short-sale
  order from a broker-dealer that is not a member
  of the NASD (non-member), must make an
  affirmative determination that (i) it will
  receive delivery of the security from such
  non-member or (ii) that it can borrow the
  security on behalf of such non-member, in each
  case, for delivery on the settlement date. The
  amendments to NASD Rule 3370 effectively
  eliminated the previous practice of routing short
  sell orders through broker-dealers domiciled in
  foreign jurisdictions (including Canadian
  broker-dealers, who are not subject to U.S.
  securities laws) whose rules do not require a
  borrow of a security prior to a short sale,
  effectively making all such short sales naked.

21

• Short Selling and Naked Short Selling (contd)
• Recent SEC Action to Address Naked Short Selling
• SEC Emergency Order, Release No. 58166 / July 15,
  2008 the SEC announces an emergency temporary
  rule preventing short sale transactions in 19
  individual securities unless such person or its
  agent has borrowed or arranged to borrow the
  security or otherwise has the security available
  to borrow in its inventory prior to effecting
  such short sale and delivers the security on
  settlement date.
• The Emergency Order was intended to eliminate any
  possibility of a naked short sale, because a
  covered security was required to be delivered on
  the settlement date. Essentially, for covered
  securities, the Emergency Order eliminated the
  reasonable grounds exception contained in
  Regulation SHO.
• The Emergency Order was announced July 15, 2008
  and was temporarily extended until August 12,
  2008 the latest possible date allowable by the
  SECs Emergency Order powers.
• Interestingly, the Emergency Order applied only
  to the institutions who have recently been given
  access to the Federal Reserves Primary Dealer
  Credit Facility.

22

• Short Selling and Naked Short Selling (contd)
• Other Actions Addressing Naked Short Selling
• Additional subpoena activity by the SECs
  Division of Enforcement , with efforts aimed at
  uncovering information relating to naked short
  selling conducted or facilitated by hedge funds,
  investment banks and broker-dealers.
• SEC Proposal for a new short-selling antifraud
  rule Rule 10b-21.
• The proposed rule highlights the liability of
  those deceiving their broker-dealer or others
  regarding their intention to pre-borrow stock
  before effecting a short sale. The rule is
  designed to prevent short sellers from
  misrepresenting to a broker that such trader has
  properly located a stock to borrow.
• See http//www.sec.gov/rules/proposed/200/34-57511
  .pdf

23

• Short Selling and Naked Short Selling (contd)
• Revisiting the Uptick Rule
• On July 6, 2007, the SEC eliminated the Uptick
  Rule
• The Uptick Rule or Rule 10a-1 under the
  Exchange Act contained short selling in rapidly
  declining markets by requiring that all listed
  securities be sold short only at a price above
  such securitys last listed price.
• The Uptick Rule, initially adopted in 1938, was
  designed to prevent the use of short-selling as a
  tool to drive down the price of a security in a
  bear raid.
• However, the SEC abolished the rule in July 2007
  following a two-year pilot program and three
  academic studies suggesting the rule had been
  rendered ineffective and non-essential.
• Numerous securities and finance experts have
  called for a reinstitution of the Uptick Rule
  in light of the following factors (i) the
  conditions existing at the time of the rules
  adoption are beginning to reappear, (ii)
  international regulators are beginning to examine
  the wisdom of taking similar steps and (iii) the
  perception that the SECs enforcement tools and
  efforts are increasingly overmatched, antiquated
  and ineffectual.

24

• Short Selling and Naked Short Selling (contd)
• Possible Future Regulation by the SEC and Others
• Expanding the scope of the recently expired
  emergency order to address naked short selling,
  including a potential elimination of the
  reasonable grounds exception to Regulation SHO
  across the broader market.
• Reinstitution of the Uptick Rule
• One member of the U.S. House has already
  introduced legislation to effect such change.
• Expansion of reporting and disclosure
  requirements the SEC is considering a
  requirement that institutions report substantial
  short positions (like the longstanding
  requirement that institutions report substantial
  long positions).
• Overhaul of the nations regulatory and legal
  framework governing the financial industry both
  the SEC and the Treasury Department have proposed
  sweeping changes.
• Other Congressional / Legislative Action

25

• Credit Default Swaps (CDS)
• What are credit default swaps?
• CDS are akin to insurance contracts that pledge
  to cover losses on covered securities in the
  event of a default. CDS typically apply to
  municipal bonds, corporate debt and mortgage
  securities. Essentially, the buyer of a CDS
  purchases a contract over a period of time for a
  premium and in return receives assurance that any
  losses will be covered in the event of a default.
• CDS were initially used by those who held
  corporate bonds as a method of hedging their
  position in the event of a default. However,
  today much of the CDS market is dominated by
  investors (or speculators, as critics would say)
  who do not necessarily hold the underlying bonds
  being insured.
• In market parlance, a naked credit default swap
  is the purchase of a CDS by an entity that does
  not own the underlying asset (corporate or
  municipal bond).
• The size of the CDS market has grown
  exponentially in the last decade. There are 62
  trillion of CDS transactions outstanding, up from
  just 1 trillion in 2000. (For comparison, as of
  mid-2007 the size of the total U.S. stock market
  was 22 trillion)

26

• Credit Default Swaps (CDS) (contd)
• Effects of the Exploding CDS Market
• Prices for CDS have been exceedingly volatile
  for example, in 1Q2008, the price for CDS of
  certain key financial institutions skyrocketed to
  unprecedented levels.
• Given the volatility in the pricing of CDS and
  the fact that value is determined by the
  likelihood of default of underlying issuances,
  rumors and other potentially negative activity
  involving an issuer have the potential to make
  trading in CDS quite lucrative.
• As the stock market has declined in recent
  months, companies that sold CDS insurance (as the
  insurer) have taken enormous write-downs.
• For example, in August 2008 AIG disclosed it was
  taking a 5.6B write-down in its CDS portfolio
  relating to mortgage-backed securities.
  Moreover, in the last calendar year AIG has
  written down the value of its CDS portfolio
  approximately 26B.
• As of September 2007, bond insurers had written
  656B in credit insurance, with approximately
  126B of that total relating to mortgage-backed
  securities. Total resources that have been set
  aside to pay claims relating to such contracts
  amount to only 54B.

27

• Credit Default Swaps (CDS) (contd)
• Regulation and Rules Governing the CDS Market?
• On the whole, the CDS market is largely
  unregulated.
• Intermittent public reporting of the pricing of
  trades
• No formal clearinghouse for the OTC market and no
  standard CDS contract
• No standard capital requirements and no standard
  way of valuing CDS
• CDS contracts can be swapped from investor to
  investor without oversight (except for
  contractual limitations set forth in the CDS
  contract)
• An original CDS can go through 15 or 20 trades.
  So when a default occurs, the so-called insured
  party or hedged party doesnt know whos
  responsible for making up the default and if that
  end player has the resources to cure the
  default.
• Harvey Miller, Weil, Gotshal Manges LLP
• While many observers note that counterparty risk
  is managed via contract, many observers are
  calling for increased transparency.

28

• Credit Default Swaps (CDS) (contd)
• Potential Future Regulation of the CDS Market
• Certain state and federal regulators have begun
  to encourage various large institutions,
  including Merrill Lynch and AMBAC, to unwind
  selected CDS transactions and close out their
  positions.
• For example, on August 1, 2008, AMBAC unwound
  1.4B worth of CDS it had written on
  mortgage-backed securities for 61 cents on the
  dollar.
• New Yorks Insurance Superintendent, Eric
  Dinallo, has made numerous public comments on (i)
  the need for increased regulation and
  transparency in the CDS market and (ii) the need
  for many regulated companies to unwind certain
  CDS transactions.
• Regulators, including in New York, have hinted at
  the implementation of a new regulatory regime
  whereby the only persons eligible to purchase CDS
  would be those who have an insurable interest
  (i.e. persons actually holding the underlying
  bonds or debt to be insured).
• FDIC Proposal In July 2008, the FDIC proposed a
  new rule that would require troubled banks to
  disclose, upon demand, detailed records and
  information relating to CDS and other financial
  contracts held by the institution.

29

• Access to the Federal Reserves Primary Dealer
  Credit Facility
• What is the Primary Dealer Credit Facility?
• The Primary Dealer Credit Facility is commonly
  known as the Federal Reserves discount window
  a liquidity facility historically open only to
  regulated commercial banks.
• The Opening of the Window to Investment Banks
• In response to the ongoing credit and liquidity
  crisis affecting the nations financial
  institutions, the Federal Reserve announced on
  March 11, 2008 (at the beginning of Bears final
  week of independent operations) that the window
  would be temporarily available to the nations
  investment banks, as well as Fannie Mae and
  Freddie Mac.
• The opening of the window was accelerated to
  March 17, 2008 (as Bear Stearns collapsed and was
  acquired by J.P. Morgan) and first extended on
  July 30, 2008. The temporary access by
  investment banks is now scheduled to expire on
  January 30, 2009.

30

• Access to the Federal Reserves Primary Dealer
  Credit Facility (contd)
• The window was opened to 19 institutions the
  same 19 institutions that were the subject of the
  SECs Emergency Order on July 15, 2008 intended
  to curtail naked short selling.
• A key point to be made in the opening of the
  window to investment banks is that investment
  banks are not subject to the same onerous
  regulations and insurance funds as are commercial
  banks the traditional borrowers from the
  window.
• Potential New Regulation Resulting from the
  Opening of the Window
• Financial and industry experts have argued for
  increased Federal Reserve oversight of investment
  banks now that such institutions have access to
  the window.
• Both the SEC and the Federal Reserve have
  testified before Congress and each has argued
  that it should be given authority to regulate the
  nations investment banks.

31

• Access to the Federal Reserves Primary Dealer
  Credit Facility (contd)
• The Treasury Department has also proposed a
  sweeping overhaul of the nations regulatory
  regime governing the financial markets. The
  proposal includes
• A merger of the SEC and the CFTC to create
  greater oversight of the securities and
  derivatives markets.
• Increased information and disclosure requirements
  applicable to investment banks and others who are
  given access to the window.
• New regulations and oversight of broker-dealers
  and investment advisers .
• In essence, many observers argue that the
  Treasury Department has essentially sought to
  make the Federal Reserve the entity responsible
  for monitoring risks across the entire financial
  system.
• See http//www.treas.gov/press/releases/reports/
  Fact_Sheet_03.31.08.pdf

32

• Conclusion
• The timeline outlining the failure of Bear
  Stearns and the often-mentioned factors that
  contributed to such failure tell only part of the
  story.
• In truth, no one not even the Bear executives
  and others who experienced the turmoil first hand
  know what specific events or actions caused the
  demise of Bear Stearns.
• The most enduring legacy may be the opportunity
  to examine all the factors surrounding the
  failure of Bear Stearns and the chance to make
  financial and regulatory changes that will (it is
  hoped) prevent similar crises in the future.
• In a business based on confidence, when the
  confidence evaporates, so does the business.