The Securities and Exchange Commission is looking closely at whether market
participants illegally colluded to short sell Bear Stearns shares before the
firm’s rescue, following accusations by the US investment bank’s chief
Alan Schwartz told a congressional hearing in Washington yesterday traders
had been spreading unfounded rumours aimed at inducing panic which led to the
run on the group, The Times reports.
Bear Stearns was forced to agree to a fire sale to
JPMorgan Chase for a
fraction of its market value last month following rumours that the firm was on
the brink of bankruptcy which prompted customers and lenders to pull their money
out of the group.
‘I would say it looked like more than just fear,’ Schwartz said. ‘It looked
like people wanted to induce a panic. The impetus [for the run] was a lack of
confidence, not a lack of liquidity. Facing the dire choice of bankruptcy or a
forced sale under exigent circumstances, we salvaged what we could to avoid
wiping out our shareholders, bondholders and 14,000 employees.’
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