Bear Stearns

"From there, he moved on to the investment bank Bear Stearns’ “corporate finance” department, dealing with corporate transactions, where his cousin George Roberts worked. The head of the department was Jerome Kohlberg, and as the eldest of the three, he would become the first K in KKR. While they were still at Bear Stearns, they developed a form of business that was named “leveraged buyout,” or purchase with financial leverage. The leverage was the loan, which made it possible to buy a larger company and thereby generate greater profit. Leveraged company purchases had been done before in various ways, but never in this structured way or with such a high proportion of debt. The reason why it is more effective to use borrowed money than your own capital is that interest on debt is tax-deductible."

"In March, JP Morgan Chase rescued its competitor Bear Stearns by buying the company for one dollar. Over the coming months, it would become clear that many more players had bought securities linked to the American mortgages. Securities whose value plummeted when the loans were not paid."

"In March, JP Morgan Chase rescued its competitor Bear Stearns by buying the company for one dollar. Over the coming months, it would become clear that many more players had bought securities linked to the American mortgages. Securities whose value plummeted when the loans were not paid."

"In the middle of dinner, I decided to call the office and see if there was any news. I found a pay phone and was told that Redstone’s primary adviser at Bear Stearns had come up with the idea of adding a CVR, a contingent value right, to the pot. The CVR was a new Wall Street invention. It meant that if Viacom stock didn’t rise within a year after purchasing Paramount to a certain price, then the shareholders would get a stock dividend to make up the difference. This was valued at $2 a share higher than our offer. It was a gimmick, but theoretically had dangerous consequences I didn’t want to risk. What we didn’t know was that Ace Greenberg, head of Bear Stearns, had guaranteed to Sumner that he could manipulate the stock during that one-year period so that there would never be a loss—it would never go below a certain level, so there would be no risk. And eventually that is what happened. It wasn’t entirely legal, but I was too Rebecca of Sunnybrook Farm to even know about, much less consider, such a manipulation."

"The developments at Bear Stearns certainly seem to be positive and as a result we will, of course, intensify our surveillance of all positions and expenses. You know how I feel about the dangers of overconfidence."

"Bear Stearns is probably going to sell stock to the public, and there is one guarantee that I would like to give the potential buyers of our stock—they are going to get the fairest shake from us that management can give any public shareholder. This place is going to be run tight, and the reasons are not all altruistic. We are not going public for the perks. We are going public for a number of reasons, and one is that we want the stock to appreciate."

"“The business you are in is just plain difficult at this time. When you entered the industry, you were warned that it was cyclical but bull markets tend to cloud realism. You are now in a period that separates the men from the boys. Mrs. Haimchinkel Malintz Anaynikal suggests that when the going gets tough—go shopping! A certain officer of Bear Stearns suggests that when the going gets tough—start selling positions! My suggestion is that when the going gets tough—the tough get going! You have no option but to follow my suggestion. If you do, you will prosper beyond your wildest dreams when the market turns— and it will. Your advisor, junior grade Itzhak Nanook Pumpernickanaylian”"

"Many years ago, your Executive Committee decided that all purchases of services were to be centralized to help us maximize our buying power. As an example: anything needed in the office had to go through Jim Lang’s area. Any need for a lawyer had to be picked by Dave Glaser or Alan Schwartz. Anything needed for the repair and maintenance of the toilets had to be cleared with Alan Greenberg. There is no such thing as an “approved” list. The fact that some plumber did a marvelous job for us in the past does not mean that an associate can take it upon himself to engage that person for new work. If you need a plumber, you must call me and I will decide who gets the next assignment. I repeat, there is no “approved” list that people at Bear Stearns can initiate a call to. If you need the services of an accountant, lawyer, plumber, printer, etc., you must speak to the person that your Executive Committee has picked. You cannot make the choice."

"Some time ago we informed the people at Bear Stearns that no legal business, printing business, plumbing business or anything else that Bear Stearns pays for can be assigned without the approval of David Glaser (x3763) or Richard De Rose (x3767). I made a terrible mistake. I did not remind you of this every three months as I should have; so I am reminding you now. If you bite a dog and need a lawyer, you can hire one without our permission. If you expect Bear Stearns to pay a legal bill, you had better get the permission of one of these men I mentioned or you will end up paying the bill yourself."

"I can guarantee very little about the future, but there is one thing you can bet on. Your executive committee is going to spend a lot of the new year stressing fundamentals. I do not think our success has been due to luck (although all of us welcome and appreciate good luck). Football teams that are in great condition and can block and tackle, win. We are going to win because we constantly keep in mind certain axioms such as: 1). It is our job to inspire receptionists and secretaries to smile and sparkle when speaking to or seeing clients. The top people at Bear Stearns set an example by returning all calls promptly. 2). Avoid the herd mentality. 3). Control expenses—even more so in good times. 4). Every department should be staffed with the best and the brightest because I cannot tell you which area of our business will be “hot” six months from now. 5). Reduce expenses. 6). We are going to stick to the things we think we know something about. I am too old to start selling cars, costume jewelry or life insurance. 7). Conceit and complacency are dangerous, particularly in our line of work. If I ever feel that the people at Bear Stearns start thinking their body odor is perfume and I cannot convince them otherwise—I will sell my stock. 8). I like people who conduct their business “neat and clean.” If you do not understand that, call me. 9). Cut expenses. 10). We must always be on guard in dealing with new relationships, and our associates must always be aware that we are watching the shop and them at all times. The best protection against in-house fraud is for management to have a great rapport with associates big and small. They will see aberrational behavior in a co-worker four years before internal audit spots the deception."

"All of us receive various printouts and other printed matter every day from Bear Stearns. If you do not need the information or if the information should not be for you, call Pat Ripley 212-272-3271. Pat will then do two things. She will stop the useless flow and also target you for a reward. If you do not cut off information you should not be exposed to, you will be fined. Read this memo carefully, and be sure the people you work with understand our policy."

"1. He is a strong believer that people who talk too much seem to have bad luck. 2. People who do not return phone calls promptly do not seem to make the grade at a highly profitable firm. 3. People who object to end runs will never make it in football, or with successful investment banking firms. Certain groups do need to observe a “chain of command” atmosphere, but highly motivated, intelligent people do not need this handcuff. 4. A firm that has enthusiastic receptionists and telephone operators starts off with a tremendous advantage over the dummies of the world. Keep in mind that the first impression people receive from Bear Stearns is with those associates. 5. If a business person has to ask his accounting department if he is making a profit, he will not be in business very long."

"We need your help. Please help us get a message out to every associate. It is essential that once again we stress that we welcome every suspicion or feeling that our co-workers might have about something they see or hear that is going on at Bear Stearns that might not measure up to our standards of honesty and integrity. This should be a H.M.A.* crisis-control yellow warning. We want people at Bear Stearns to cry wolf. If the doubt is justified, the reporter will be handsomely rewarded. If the suspicion proves unfounded, the person who brought it to our attention will be thanked for his or her vigilance and told to keep it up. Forget the chain of command! That is not the way Bear Stearns was built. If you think somebody is doing something off the wall or his/her decision-making stinks, go around the person,** and that includes me."

"Our earning power has changed materially, but some things have not changed one bit: 1. We have no more layers of management now than we had in 1978. 2. We still realize the importance of trying to cut expenses. 3. We still realize how important it is to be on guard against conceit and arrogance. 4. We still are deeply concerned about the well-being of every person associated with Bear Stearns."

"There are three things I know for sure when we are in one of these cycles: 1) This period of euphoria will not last forever (neither I or any other human can accurately predict the end). 2) Humans tend to get sloppy when making money is easy. 3) Bear Stearns will not get caught up in the hysterical optimism and the people at Bear Stearns will not get careless or conceited. It is the job of your executive committee to keep all of our feet on the floor. It is the job of your Executive Committee to see that we maximize the opportunities that we are being handed."