Saturday, September 25, 2010

Wall Street 2: Money Never Sleeps (and beyond)

The Oliver Stone directed movie is a decent drama, broadly based on the events surrounding the financial crisis at roughly the time Bear Stearns was sold to JPMorgan Chase at a fire sale price.

Anyone watching the film will get a rough sense for the flavor of Wall Street, but don't expect any in depth explanation of the business cycle or the Federal Reserve manipulation of the money supply that caused the crisis. There is none.

The closest the movie gets to any manipulation is a secondary manipulation, the one that brought down Bear Stearns. There the film does a semi-decent job of showing how dark forces may have forced Bear Stearns into the waiting arms of Jamie Dimon and JPMorgan Chase.

Economist magazine, clueless as ever, identified the film's fictional firm, Churchill Schwartz as:

...the least disguised fictional name ever. Executives at Goldman Sachs are said to be unamused...the script is sprinkled with echoes of Goldman: Churchill Schwartz bets against markets that it makes, including subprime mortgages; its credit-default swaps are bailed out at par; and it has friends at the Treasury.
In fact, Churchill Scwartz appears to be a composite of Goldman Sachs and JPMorgan Chase. Both, of course, deserve the brutal treatment handed down by Stone.

The film is also filled with fun symbolism. Kids blowing bubbles---really huge bubbles, and in the first conference room scene, through the conference window outside you see a clear shot of the building next door, which happens to be the lipstick building, which all New Yorkers know is from where Bernie Madoff ran his Ponzi scheme.

The farthest from reality the movie goes is the suicide of the head of the firm that is supposed to represent Bear Stearns.

It should be noted that during the financial crisis there were no suicides among the top Wall Street operators. Some saw their firms collapse, but they all cashed out with at least many millions, most hundreds of millions.

The movie character that did commit suicide was the thinly disguised head of Bear Stearns, Ace Greenberg. If you would think anybody might want to commit suicide it was Greenberg. He did more to build Bear Stearns into the powerhouse that it was than any other person, and it was in shambles, sold dirt cheap to JPMorgan Chase. Yet, his demeanor at the time Bear Stearns was sold into the waiting arms of JPMorgan Chase was far from despondent.

I was in New York City on the weekend that Bear Stearns was sold at the fire sale price. I also happened to pass by the Bear Stearns building while the negotiations were coming to a close. A CNBC camera crew was outside the building and I stopped to talk to them.

While talking to the crew, Greenberg walked out. What struck me immediately was his demeanor. He didn't appear to be sad, despondent or angry. Angry might have been the most appropriate response, since at that point the shares of Bear Stearns were going to bought by JPMorgan Chase for $2.00 per share (Becasue of shareholder outrage the price was later raised to $10.00 per share--still very cheap). But the $2.00 price was an incredibly low price. Bear Stearns was illiquid not insolvent. If Bear Stearns would have gone into bankruptcy at the time of the $2.00 low ball offer, they most assuredly would have come out of bankruptcy at a multiple of the $2.00 price. It remains a mystery why Bear Stearns' top players agreed to the absurd $2.00 price. But Greenberg left the build appearing to not have a care in the world.

I never wrote about Greenberg's demeanor on that day. I chalked it up to his personality.

Then about a week later, I received an anonymous email. The emailer went through quite a bit to hide his/her identity. An anonymous type web site was used  that sends out anonymous emails, and covers all tracks. The emailer seemed to have inside information about the meetings that went on that weekend. They would explain Greenberg's comfortable demeanor. But I never ran the story then, and will not do so now, because there just isn't enough verifiable facts to the emailers story, though it has the feel of being true.

But the big story, and the great mystery, may be what went on in the Bear Stearns board room that weekend---and that might make for one helluva blockbuster movie.


  1. Mr. Wenzel,
    could it be that Churchill Scwartz is a way to recall to memory Alan Scwartz? if I don't remember bad, a day Mr. Scwartz said to the mass (mass to mean people without insider information) shareholders that read bigcharts news and so on that Bear Stearns was as leveraged as the other peers, specifically to be trusted, to block panic selling but the day after, the same, said that it was choosen to sell to JP Morgan for 2 dollars a share to save so many my view the public face of traitor was him...he begged trust from shareholders just to sell them in exactly the same time; may be, and here it is my pure fantasy, that Oliver Stone in choosing Winston wanted to recall at the same time a man famous for strategical achievements (Winston Churchill for British Kingdom during the WWII as Jamie Dimon for JPM during The Great Recession) but also recalling the name - Alan - to which Winston Churchill is said to be greatly in debt for his greatest war successes (Alan Brooke since WWII was the chief commander of British Army, one very frequently consulted by Winston Churchill, and very crucial in the Allies win of the WWII).

  2. Well said, and absolutely agree.