Bear Stearns Case Summary

In 1935 the Public Utilities Holding Act was passed which led eventually to the breakup of privately held utility companies. Bear Stearns became an aggressive trader in the expanded market for securities being issued to place the utilities in public hands.
In the 1940’s, the firm became a large player in mergers and acquisitions, particularly in the freight and transportation industries as cars and trucks began to replace railroads as the primary mover of people and freight. A once booming rail industry was suffering a long and painful decline with most of the nation’s railroads close to bankruptcy.
In the 1950’s Bear Stearns was one of the principal originators of block trading which by 1960 was the foundation for most profitable Wall Street
He had a reputation as one of the most aggressive traders on Wall Street and like his predecessors he tended to ignore strategic planning and focused on immediate opportunistic returns.
The willingness to take risks enhanced Bear Stearns’ reputation as a primary player in corporate takeover activity. The firm was very adept at disguising takeovers until the last minute. Its ability in this area also led to it having a somewhat tarnished reputation as it would sometimes wage proxy battles against its own clients. The Securities and Exchange Commission brought action against some companies that had aided Bear Stearns in “parking stock” which was a tactic used to facilitate corporate takeovers.
By the 1990’s the firm was a major player in initial public offerings for a variety of foreign and domestic companies. It also was a leader in clearing trades for other brokers and brokerages and had one of the leading analysts to broker’s ratio in the business. Bear Stearns also continued its drive to establish itself as a leader in emerging markets such as Asia and Latin America.
In 1997 Bear Stearns made the first public securitization of Community Reinvestment Act