International Investing

Outside of Fortune, very few publications write good business stories. The Wall Street Journal has interesting articles and does good reporting, but rarely writes about the internal drama of Wall Street in such a readable way. It’s like something Bethany McLean or Kurt Eichenwald would have written. Part 3 will be out tomorrow. Read part 1 and part 2. Here is an excerpt:

Mr. Upton recited the damage from numbers scratched on a yellow legal pad: Since the previous Friday, the firm had nearly exhausted its $18.3 billion in cash reserves, leaving it with $5.9 billion. But it still owed Citigroup Inc. $2.4 billion. Mr. Molinaro buried his head in his hands. Mr. Schwartz looked ashen and left abruptly.

Just a few blocks away on East 48th Street, Mr. Dimon, the J.P. Morgan CEO, was celebrating his birthday with his family at the Greek restaurant Avra. The banker, who could be painfully blunt, was annoyed when his cellphone rang. It was reserved only for immediate family and business emergencies. Reluctantly, he picked up.

It was Mr. Parr, the Lazard banker representing Bear Stearns. He asked if Mr. Dimon could speak with Mr. Schwartz. Moments later, Mr. Schwartz called. “Let’s do something,” he told Mr. Dimon, who was now on the sidewalk outside. Mr. Dimon couldn’t fathom making a deal that night, but he agreed to try to help.

Bear Stearns’s offices were then filling up with lawyers. The firm’s usual corporate counsel, Cadwalader, Wickersham & Taft LLP, sent over a large team, and dozens of bankruptcy specialists were also called in. The attorneys fanned out over a suite of rooms on the sixth floor: One large group prepared a bankruptcy filing; the other worked on various rescue scenarios involving cash infusions from other parties.

Mr. Schwartz arranged an emergency board meeting to brief directors that Thursday night. It was late, so most phoned in. James Cayne, who’d remained as chairman after stepping down as CEO Jan. 8, missed part of the discussion because he was playing in a bridge tournament at a Detroit hotel.

Directors authorized an emergency bankruptcy filing, but Mr. Schwartz still held out hope that a rescue could be arranged. A bankruptcy filing for Bear Stearns — with its nearly 400 different subsidiaries — would be immensely complicated. If the firm could make it through Friday, executives believed, they could come up with a more tenable fix to their problems.

Around midnight, Matt Zames, a senior J.P. Morgan trader, arrived with a team to look over Bear Stearns’s books. The group appeared stunned by its financial position. “We need to talk to the Fed,” said Mr. Zames. “Where are they?” Bear Stearns officials directed them down the hall to the firm’s legal library, where officials from the New York Fed had been gathered for several hours.