Behind the frustration directed at the Fed and Cayne, there is a growing perception at Bear that Schwartz might have done more to fight off the JPMorgan deal. “The firm put itself in a position to be susceptible” to a meltdown, one Bear employee remarked. “We were the smallest of the major firms. In a famine, the skinny guy dies.”
Others wondered why Schwartz, who was attending a conference in Florida, didn’t race back. “When Alan went on CNBC and it came up on the screen that he was in Florida, I thought, ‘That’s weird.’ ” “Why didn’t he come back?” said another staffer. “It’s like the president during a crisis. You need him in the White House.”
Above all, Cayne and Schwartz broke the Wall Street covenant between management and employees. “I’ll accept that you’ll be ridiculously overpaid; just keep the firm going so I can get paid,” a former Bear executive said. “That’s all you have to do. In the most cataclysmic way, they didn’t uphold their end of the bargain.”
On March 19, Dimon received a frosty reception at his first appearance at Bear’s Madison Avenue headquarters. “The meeting was not handled well,” one Bear banker familiar with the exchange said. Some staffers took Dimon’s message to mean, “We’re going to keep the top guys, and screw you if you’re not one of them.”
In the weeks ahead, Dimon and JPMorgan still have to close the deal and persuade Bear’s shareholders to approve the $2-per-share valuation. The contours of a brutal shareholder fight are taking shape. Last Monday, shareholders including British billionaire Joe Lewis, who owns 9 percent of the firm, and Private Capital Management’s Bruce Sherman, with a 4 percent stake, traveled to New York to meet with Bear executives. Schwartz angrily told one shareholder that Bear had been “knifed” and “mugged” by the deal, a sentiment shared by investors. “This is no different than someone putting a gun to your head and saying, ‘Give me your kid,’ ” one insider said.
On March 19, the day Dimon was making the rounds at Bear, Lewis issued a securities filing stating his intention to take “whatever action” was needed to block the JPMorgan acquisition and bring in a competing bidder at a higher price.
Whatever happens, thousands of Bear employees are going to be laid off. On March 20, Bear staffers received severance packages including payouts based on last year’s bonuses. Many aren’t waiting to find out. Staffers are polishing their résumés and working with headhunters to land new jobs. Indeed, even if the shareholders block the deal, it’s unclear what, if anything, will be left of Bear Stearns. “By the time a shareholder vote comes around, there will be nothing there,” one staffer said.