[clapsoewmred]

^ i'm not saying that they couldn't have used better risk management, but what actually did them in is quite scary b/c it could've happened to any i-bank. basically, one of their major hedge fund clients had to get out of all of its trades in order to meet margin calls from its own counterparties/clients, which made it necessary for bear to draw way down on their liquidity reserves. word got around the street that this was happening and many of its other large institutional clients feared that they would get stuck in a sinking ship so all made a run in bear - this all happened over the course of less than 2 days. the fed has since stepped in and made themselves a direct lender to i-banks, so futurer similar crisis now avoided. before that, only commercial banks could draw directly from the fed, thus the need for jpm to go to the fed on bear's behalf friday (which turned into the fed effectively buying bear for jpm). lesson learned - i banks need to keep a much higher reserve of liquid assets on their balance sheet. this whole credit squeeze is most likely going to result in a new regulatory framework in which the fed or a similar entity regulates i banks in addition to commercial banks.