Here is a blow by blow account of what happened this weekend. This is history in the making folks, read this article and remember it the rest of your life. A brokerage firm like Bear Stearns BSC or a bank is nothing but a pile of IOUs and promises. When the promise cannot be kept, there is no balance sheet. And that is the lesson for accountants. Eventually this crisis will pass. And years from now in the next market run up, you will read about how smart and clever some ‘investment banker’ is, assuming that term survives. Remember this incident at that time.
What do I mean if the term investment banker survives. Perhaps by the time this is over, Wall Street will be so reviled that they need new names. It has happened before. IN the 1920s the preferred investment vehicle was the Investment Company, indeed the Securities Acts of 1933 and 1934 are enttield The Investment Company Acts of 1933 and 1934. But by the mid 1930s those vehicles were held in such low regard they had to be renamed to market them to the public. And so they were renamed
Mutual Funds, true story…..
Clearly the employees of BSC , like those at Enron, lost everything in their savings of BSC stock. Note one fellow says the building ought to be worth $8 a share. Maybe but as the article notes, it is not possible to cherry pick assets given the bankruptcy code, ignoring the bad to only pick the good.
In a crash, cash is king.
Good thoughts from Jim Grant on the world’s reserve currency. He notes that every country using the Dollar is now in trouble with raging inflation but we are setting policy only for ourselves. Good point, will the Intl Monetary Fund supercede the FED?
Professor Elam 
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