Abstract

The case examines how Bear Stearns, the fifth largest investment bank in the US, faced liquidity crisis in March 2008, leading to its collapse. It details the sequence of the events that led to its collapse and the measures taken by the bank to avoid the same. The case covers a detailed note on the sub-prime crisis in the US and how Bear Stearns incurred significant losses in its investments in mortgage backed securities. It also examines the role of the US Fed to bail out Bear Stearns by helping JP Morgan Chase buy the troubled investment bank.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the reasons that led to the subprime crisis in the US and its impact on financial institutions. Appreciate the importance of risk management in financial institutions. Examine the need for strict regulations for controlling OTC derivatives ma

Keywords

Bear Stearns, JP Morgan Chase, US Subprime Crisis, Risk Management, Liquidity Management, Adjustable Rate Mortgages, Subprime borrowers, Mortgage backed securities, US Federal Reserve, Collateralized Debt Obligations, Securities Exchange Commission, Credit Default Swaps, Hedge fund, Securitization Process, Alan Greenspan, Glass-Steagall Act, Value at Risk, Stress Testing, Derivative Instruments