UNEDITED Testimony of Ex-Bear Stearns CEO James E. Cayne
Published: May 05, 2010
UNEDITED Testimony of James E. Cayne
Before the Financial Crisis Inquiry Commission
May 5, 2010
Chairman Angelides, Vice-Chairman Thomas, and Members of the Commission, AND ALL MY HOMEBOYS AND HOMEGIRLS FROM 'ROUND THE WAY HITTIN THE CHEEBA TODAY, my name is James E. Cayne, BUT SOME OF YOU MIGHT KNOW ME BETTER AS THAT BAD A$$ BRIDGE CHAMPION MIDNIGHT TOKIN JIMMY C ... WHAT UP? AS YOU KNOW I was the F'N MAN AKA THE LAID BACK CEO of Bear Stearns from 1993 until January 8, 2008, and I remained non-executive Chairman DOING SQUAT BUT HITTING THE NORTHERN LIGHTS until the firm was acquired by JPMorgan Chase & Co. in June 2008. I appreciate the invitation to appear before you today BUT DAMN, DON'T Y'ALL HAVE SUMTHIN BETTER TO DO, LIKE LIGHT UP LLOYD OR FILL SOME BROTHER'S BUSTER?
ANYWAY, LIKE I WAS SAYING, MAN, Bear Stearns was ONE HELL OF a remarkable MONEY MAKING BALL BUSTING RABBLE ROUSING COWBOY OF A company and I am proud to have BANKED BILLLIONS AND FREAKIN BILLIONS AND spent my career there. I joined the firm in 1969 NOT LONG AFTER ME AND THE CREW CAME DOWN OFF OUR TWO YEAR SUMMER OF LOVE HIGH when it was a partnership with about thirty partners, and I HUNG OUT IN THE BOYS ROOM AND PLAYED BRIDGE LIKE YOU READ ABOUT AND TRADED MY SUBPRIME ARSE OFF AND worked there for almost forty years. Even after I SLOWED DOWN SOME USING JUST AN OUNCE A DAY AND it became a public company, a large part of the firm—about one-third—was owned by its employees. To align the long-term interests of employees and shareholders, a HELLUVA significant part of its senior employees' compensation (typically around one-half or more for the most senior members of management) consisted of restricted stock units and stock options AND PLENTY OF CHEEBA STICK. Like many employees I rarely sold ANY OF MY OWN CHEEBA AND NEVER DITCHED a share of the firm’s stock except as needed to pay SOME OF MY FAVORITE DEALERS OFF AND OF COURSE TO PAY my FREAKIN taxes (BUT THANKS TO MY SWISS HOMEBOYS THEY WEREN'T THAT HIGH, EVEN THOUGH I SURE WAS ... HA!).
ANYWAY, MAN, Bear Stearns AS Y'ALL KNOW had a strong WEED culture AND FROM TIME TO TIME WE HIT SOME of THAT risk management SHYTE. The head of the firm's risk management reported to the firm's Executive Committee. My office door was always open WHEN I WASN'T HITTING THE BOWL OR PASSING IT to any employee who WANTED SOME OR WHO had concerns about violations of our risk or compliance policies, or any other inappropriate conduct.
Beginning in early 2007, the market for MARY JANE AS WELL AS THEM subprime mortgages and securities backed by those mortgages began to experience severe dislocations. Although FROM WHAT I CAN RECALL, WHICH AIN'T THAT MUCH TO TELL THE TRUTH, MAN, Bear Stearns had limited involvement in the subprime sector, the subprime crisis resulted in losses in two hedge funds managed by Bear Stearns Asset Management, a wholly-owned subsidiary of Bear Stearns. Although we TYPICALLY WERE TOO HIGH TO DO ALL THAT MUCH WE attempted to preserve the stronger of the two funds by extending $1.6 billion in secured financing to that fund, BUT both funds ultimately failed WHILE I WAS IN THE MEN'S ROOM DOING YOU KNOW WHAT (IT WAS POST-4:20, SO, YOU KNOW ...).
I do not believe that MY REPORTED AND REPORTED AND REPORTED LOVE OF GRASS HAD ANYTHING TO DO WITH the collapse of these funds, MAN, NOR was IT a significant cause of the later collapse of Bear Stearns itself. While Bear Stearns took some of the funds' assets onto its balance sheet in connection with the funds' bankruptcies, THE DOUGH I SPENT ON GRASS AND those assets represented less than one-half of one percent of the firm's total assets.
Over the course of 2007, the market for HYDROPONIC AND subprime and, increasingly, other mortgages continued to decline. In view of Bear Stearns' leading role in WALL STREET WEED DEALS AND the mortgage industry, these developments GOT ME A BIT PARANOID AND gave rise to market uncertainty about the firm.
We believed that this concern was unjustified and that the firm had ample STASH ON HAND AND SOME OF THAT capital and liquidity. Nevertheless, we RATIONED WHAT WE HAD, MIXING IT WITH TOBACCO, AND worked aggressively to address the market's concerns. During the fall of 2007, the firm raised an additional $2.5 billion in long term debt AFTER OUR ANNUAL BOARD MEETING IN AMSTERDAM. We also entered into an agreement in principle for a joint venture with a major JAMAICAN CARTEL AND A LITTLE Chinese securities firm that would have increased MY ABILITY TO SCORE STRONG CHEEBA AND Bear Stearns’ marketing strength in Asia.
ANYWAY, MAN, As I mentioned, I stepped down as CEO in early January 2008 AFTER I WAS TOLD TO GET THE FLOCK OUT AND NOT TO LET THE DOOR HIT MY DOPE SMOKING ARSE ON THE WAY OUT, and was not involved in the day-to-day management of the firm following my departure. Nevertheless, I THOUGHT A LOT ABOUT THE FIRM WHILE WATCHING SCOOBY-DOO AND FLINTSTONE RERUNS (DAMN, THAT FRED FREAKIN KILLS ME!) AND would like to offer my opinions about the reasons for Bear Stearns' collapse.
Despite the WEAK TO NONEXISTENT efforts we made prior to 2007 to reduce our exposure to the subprime sector, the scale of MY POT HABIT AND our activities in other sectors of the mortgage market caused widespread concerns about Bear Stearns' solvency. These concerns were unfounded SINCE I REALLY WAS ONLY GETTING HIGH IN THE MORNING AND EVENINGS. Our capital ratios and liquidity pool ALSO remained high by historical standards. Nevertheless, as a result of these rumors, during the week of March 10, 2008, brokerage customers withdrew assets and MY SHIPMENT DIDN'T COME THROUGH AND counterparties refused to roll ME A FATTY OR over repo facilities. These events resulted in a dramatic loss of liquidity AND I WAS FORCED TO BUY SOME SWAG WHICH MADE ME PARANOID AS HELL. The market's loss of confidence, even though it was unjustified and irrational, became a self-fulfilling prophecy.
Subsequent events show that Bear Stearns' collapse was not the result of MY BATHROOM STALL HABITS OR THE BRIDGE TOURNAMENTS I COMPETED IN INSTEAD OF RUNNING THE DAMN FIRM OR any actions or decisions unique to Bear Stearns. Instead, it was due to overwhelming market forces that Bear Stearns, as the smallest AND BEST AND COOLEST CATS of the independent investment banks, could not resist. Only a few months after Bear Stearns collapsed WHILE I WAS HIGH AS A KITE, the same market forces caused the collapse and near-collapse of much larger institutions, such as Lehman Brothers. The efforts we made to strengthen the firm were reasonable and prudent, although in hindsight they proved inadequate AND ANYWAY MOST OF '07 AND '08 IS PRETTY MUCH A BLUR SINCE I WAS STONED MOST OF THE TIME.
Considering the severity and unprecedented nature of the turmoil in the market, I do not believe there were any reasonable steps we could have taken, short of SMOKING LESS (WHICH, HA, WASN'T EVEN AN OPTION, I MEAN COME ON, MAN) OR selling the firm, to prevent the collapse that ultimately occurred.
I look forward to answering your questions AFTER I GET BACK FROM THE MEN'S ROOM. SAY, MAN, YOU GOT A LIGHT?