it doesn't happen if your company has a sane and convincing leader who can go on CNBC and say, "here, look at our books! Our firm has such robust ratios of cash and hard tangible assets to covenants and other accounts payable that it really doesn't matter what our stock price does because, familiar as we are with the pussy nature of Wall Street confidence and the easily-distracted myopic ephemera-addled lemmings who govern such day-to-day fluctuations, we've seen to it to inoculate our business from such attacks by stockpiling enough hard currency and solid — but also liquid! — financial instruments that we can weather a crisis of confidence without having to undermine our case by begging them for money!" Lehman had no such leader. And it had no such assets!

One of the less-noted upshots of this whole Lehman mess is that maybe the Fed didn't give it the proverbial "Bear Hug" because it seemed like less of a victim of "scurrilous malicious rumors" than Bear Stearns did. And Bear had that pothead CEO! But Lehman seemed to have a victim complex about the rumors, as Andrew Ross Sorkin noted in July:

“I will hurt the shorts, and that is my goal,” Richard S. Fuld Jr. fumed.

It was April, and Mr. Fuld was blaming short sellers, one of the most maligned tribes on Wall Street, for spreading rumors about Lehman Brothers, the troubled investment bank he runs. Shorts bet against stocks, and Lehman, they were whispering, looked like the next Bear Stearns.

A Wall Street Journal story the next week portrayed him — as Cramer did the same week — as more concerned with shaming promulgators of bad rumors than figuring out the extent to which they were true:

Lehman Brothers Holdings Inc. CEO Richard Fuld Jr., whose firm's shares also have been battered, also has contacted Mr. Blankfein. "You're not going to like this conversation," Mr. Fuld told Mr. Blankfein, according to people familiar with their talk, but he was hearing "a lot of noise" about Goldman traders who allegedly spread negative rumors about Lehman. In recent months, Mr. Fuld has contacted traders he felt may have been bad-mouthing his stock, according to someone familiar with the matter. Spreading rumors one knows to be false with the intention of manipulating a public company's price is illegal.

The thing is, while Lehman seemed to have an army of friends willing to discredit the rumors at the risk of looking totally fucking ridiculous:

Absurd rumors can have legs, like the Lehman-Barclays one, which Richard Bove, an analyst at Ladenburg Thalmann, said “ranks up there with the moon is made out of green cheese in terms of its validity.”

(The specific rumor in question, and the subject of the Sorkin piece, was that Lehman might be acquired by Barclay's in a "take-under" whereby the British bank paid a discount to Lehman's stock price. Barclay's is currently in talks to do essentially that, with a whole lot less headache!)

But here's the big thing: Lehman had the nicest, most polite short-seller in David Einhorn. He made his short position public, for god sakes.

Very few people publicize their shorts, and when Einhorn did, it got Lehman’s attention. The conversation with Callan was to give her a chance to explain discrepancies he had uncovered between the firm’s latest financial filing and what had been discussed during its conference call about that filing… She was evidently not prepared for the complexity of Einhorn’s questions and tried to bluff her way through. “The conversation was reminiscent of the ones I had with Allied,” says Einhorn. “We had our questions, we were organized, but she was evasive, dishonest. Their explanations didn’t make any sense.”

Dear Lehman, Sarah Palin can do this because she is talking to people who don't have money. (And will have even less when she is through with them!) (Related: someone could use a better shade of lipstick!) In the meantime, the shorts and their self-hastening prophecies perform some of the last remaining regulatory functions on Wall Street, and in the aftermath of Enron I will never understand why they are so maligned. Doesn't Wall Street, like the post-9/11 Justice Department, need someone to poke away at its hubris, its secrecy and its destructive tendency to act as if it can impose its will all the time with impunity? Which is to say, the rumormongering shorts are so widely detested because they are like the media, only with money.

Short Interest Data: Lehman, AIG, Merrill [Seeking Alpha]
Pssst! Hear The Rumor Of The Day? [NYT]
Why Did David Einhorn Publicly Attack Lehman Brothers? [NYM]
Fear, Rumors Touched Off Fatal Run On Bear Stearns [WSJ]
The Man Comes Down On Rumormongering [Daily Intel]
Goldman Sachs Accused Of Rumormongering [NYM]

Oh, P.S., ha ha ha, Howard Stern punked everyone, no wonder our tipsters at Lehman seemed a lot less sanguine than these guys. But bankers of the banks, take it from the media, which might not be so entranced by this recession if our entire industry weren't in the throes of an irreversible decade long contraction: fucking is superior to financial success! And there is a whole world of people who work in economic sectors like "education" and "music, ha ha ha" who would not even think to equate one with the other. So take heart; at least your industry can't exactly go anywhere — someone has to figure out how much money your industry owes China and it's not going to be anyone who has spent the year cultivating microfame! — and in the meantime, get drunk, screw someone ill-advisedly and take heart in the fact that when people like me lose jobs, we have to borrow money from journalists.

Sex Diaries: The Overserved Ivy Banker [NYM]
Earlier: In Tough Economic Times, Bankers Long For Intimacy With Their Happy Endings

Dimon, you see, was on Charlie Rose's TV show last night, where he said the following about the fall of investment bank Bear Stearns:

Where there is smoke, there's fire... I think the Securities and Exchange Commission should investigate it, okay? I think if someone knowingly starts a rumor or passes on a rumor, they should go to jail.

Set aside, for the moment, the absurd notion of financial markets functioning without the free flow of all kinds of information, rumor included.

Consider, instead, how Dimon's proposed censorship would impact his onetime fan Kneale in light of how Vanity Fair described Kneale's own role in the spreading gossip about Stearns:

By noon, when CNBC anchor Bill Griffeth opened Power Lunch, Bear’s stock was down more than $7, to $63. “There are rumors out there that some unnamed Wall Street firm might be having liquidity problems,” Griffeth noted. A correspondent on the show, Dennis Kneale, a veteran of The Wall Street Journal, said, “The speculation at this point is that it’s Bear Stearns. They’re down the most in the market today. Supposedly, a couple of weeks ago, they started looking at a way to try to shop their clearing operations [They] couldn’t find a buyer. At least that’s what one guy says.”

Does Kneale think it's something other than rumormongering to pass on the "supposed" information that comes from "what one guy says?"

More likely, he is just slower on the uptake than his rival Gasparino, who was also depicted by Vanity Fair spreading unvetted information and thus another likely victim of Dimon's prison policy. Perhaps if Dimon has his way, Kneale will have the chance at an extended tutorial of some sort from Gasparino, in their cell.

[Dealbreaker, Vanity Fair]

On a conference call after the buyout agreement is reached:

Messrs. Geithner and Dimon led off with some brief remarks, noting that J.P. Morgan would be guaranteeing Bear Stearns's debts and that if the pact hadn't come together, the market impact may have been catastrophic. During the question-and-answer session, Citigroup Inc.'s new CEO, Vikram Pandit, spoke up.

Mr. Pandit — who did not initially identify himself — asked a shrewd but technical question: How would the deal affect the risk to Bear Stearns's trading partners on certain long-term contracts?

The query irked Mr. Dimon. "Who is this?" he snapped. Mr. Pandit identified himself as "Vikram." Offended that Mr. Pandit was taking up time with what he considered granular inquiries, Mr. Dimon shot back, "Stop being such a jerk." He added that Citigroup "should thank us" for staving off further mayhem on Wall Street.

Dimon rallies his new employees:

Standing on the dais with two senior lieutenants, Mr. Dimon tried to strike a conciliatory tone.

Bear Stearns's "shotgun marriage" to J.P. Morgan "is not the sort of thing we set out to do," he told the audience. Noting the pain for Bear Stearns managers facing the prospect of unemployment and big losses on their Bear Stearns stock, he added: "We can't begin to imagine how difficult this is."

In the tense question-and-answer session that followed, Ed Moldaver, a stocky, 40-year-old broker, stood up.

"This isn't a shotgun marriage," he said. "This is more like a rape."

As some in the room shook their heads and muttered uncomfortably, Mr. Dimon stared stonily at the crowd.

[WSJ]

Bear Stearns executives believed another public statement was needed. Arrangements were made for Mr. Schwartz to appear from Florida on business network CNBC.

Minutes after 9 a.m. on Wednesday, Mr. Schwartz told the cable-TV audience, "Some people could speculate that Bear Stearns might have some problems...since we're a significant player in the mortgage business. None of those speculations are true."

But before he could get through his talking points — which included mentioning the firm's strong cash reserves and indicating to investors that Bear Stearns would have a profitable first quarter — Mr. Schwartz was interrupted by breaking news from New York: Gov. Eliot Spitzer, having been linked to patronizing prostitutes, was resigning. Mr. Schwartz was dismayed, but got a chance to make his points after the news break.

Later, as the crisis is reaching a breaking point, Bear convenes an emergency board meeting. But hey, former weed-smoking CEO James "Jimmy" Cayne had better things to do:

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.

[WSJ; pic via Lolfed.com]

People who have spoken with Mr. Cayne say that he, like everyone at Bear, was stunned by the firm’s precipitous collapse and the rock-bottom price of its sale. In the past weeks, together with his wife, Patricia Cayne, who is a student of Jewish religious traditions, Mr. Cayne has spent considerable time searching for comparable events in religious history to see what lessons can be learned from the collapse of his firm, said a person who has spoken to him recently...

While Mr. Cayne has not publicly said why he sold his shares, people who know him say that it suggests a need to separate himself, emotionally as well as financially, from the firm that for so long had been part of every fiber of his being and that now had become a source of pain and disappointment.

Here's a taste of Wolfe's Croker, from A Man In Full, after his corporate meltdown and religious conversion:

"...You think if only you can acquire enough worldly goods, enough recognition, enough eminence, you will be free, there'll be nothing more to worry about, and instead you become a bigger and bigger slave to how you think others are judging you. 'You have priceless silver and goblets of gold,' said the philosopher, 'but your reason is of common clay.' As of this morning, I am as rich as the richest of you, for I am hereby handing over anything I own, the Croker Global Corporation, every last branch of it..."

"I don't know what you're like," Croker was saying, "but if you're like most uv'us here is Atlanta, you're driving yourself crazy over possessions. Just think about that for a second..."

"I can tell you that the only real possession you'll ever have is your character, that and your 'scheme of life,' you might say. The Manager has given every person a spark from His own divinity, and no one can take that away from you, not even the Manager himself, and from that spark comes your character. Everything else is temporary and worthless in the long run..."

"But you say, 'I'd rather die than sit down beside the road with a Dixie cup, begging.' Do you realize what you're really saying? You're saying, 'It ain't what I'm gonna eat or where I'm gonna stay I'm worrying about, it's saving face, it's what everybody in Buckhead's gon' think about me..."

Times: Down $900 Million or More, the Chairman of Bear Sells

During 10 critical days of this crisis — one of the worst in the securities firm's 84-year history — Bear's chief executive wasn't near his Wall Street office. James Cayne was playing in a bridge tournament in Nashville, Tenn., without a cellphone or an email device. In one closely watched competition, his team placed in the top third.

As Bear's fund meltdown was helping spark this year's mortgage-market and credit convulsions, Mr. Cayne at times missed key events. At a tense August conference call with investors, he left after a few opening words and listeners didn't know when he returned. In summer weeks, he typically left the office on Thursday afternoon and spent Friday at his New Jersey golf club, out of touch for stretches, according to associates and golf records. In the critical month of July, he spent 10 of the 21 workdays out of the office, either at the bridge event or golfing, according to golf, bridge and hotel records.

...Attendees say Mr. Cayne has sometimes smoked marijuana at the end of the day during bridge tournaments. He also has used pot in more private settings, according to people who say they witnessed him doing so or participated with him.

Shortly after the Journal's page one pot-and-bridge story appeared, Cayne was replaced as CEO and made non-executive chairman, but he still had enough responsibility to shareholders that he participated in negotiations over the JP Morgan acquisition this weekend.

(Photo: Bear Stearns via AP)

Bear Stearns became successful by turning risky variable-rate mortgages given to people with questionable credit into securities that looked like safe, sure things to investors. But—shockingly!—all those mortgages collapsed, two of Bear Stearns subprime mortgage hedge funds broke apart over the summer, and now Bear Stearns is facing a "liquidity crisis."

J.P. Morgan is funding the company for the next four weeks, but it seems like that the JPs will take over Bear Stearns completely after that, and as a result some of your rich, rich friends will be out of work.

But again, what does that have to do with the price of tea in China, or really anything to do with your life? Well, rich people will be poor, so restaurants will be less crowded and maybe even rent will go down as bankers won't be able to afford Tribeca lofts. But whatever, who would want to live in Tribeca anyway?

It's Friday and Denton said I couldn't write about Spitzer anymore, so there you have it. Your dollar, whether in coin or bill form, will soon be worth nothing. Or even less nothing than currently.

At the Hammerstein Ballroom last night, 800 bankers turned out and got wasted to watch 16 of their brethren pretend to be boxers and beat one another up (for charity!).

Josh "The Matrix" (uggh) Weintraub, "a mortgage bond trader and senior managing director at Bear Stearns," was voted "best boxer" at the end of the night, proving yet again that Bear Stearns employees would much rather do just about anything other than like manage hedge funds or whatever bankers "do."

Boxing: Wall Street Style [CNN]

Bear CEO's Handling Of Crisis Raises Issues [WSJ]