As those of you who follow financial news well know, the fall of Bear Stearns has been blamed, to a good extent, on certain rumors flying around both trading floor and board rooms of rival companies that their liquidity was in jeopardy and their finances in dire straits. Once blabbed, apparently, and without further adieu or due diligence, the walls of Wall Street's biggest surfer barney came a tumbling down....hard. And it landed on top of key execs and annhilated the lower echelon employees.

Funny thing is, back in the day when I was training for my Series 7 broker's license in Los Angeles, I knew a bunch of guys from "the Bear" who worked across the street. I worked for a funky little company that was later absorbed by Merrill-Lynch, and we did look with envy across the way at the mega-offices the Bear occupied above the Hamburger Hamlet in Century City.

One broker, who shall remain nameless, called me one day crowing about having closed a deal that netted him $50,000 in less than an hour. This was 1985 and that was a lot of money at that time. Hell, to me, it still is. Another much higher up who likewise shall remain nameless, was given a shot at becoming a broker in either the 1950s or '60s as a "young punk who never graduated high school." He became, and was at that time, one of the top grossing brokers....and had been for a while. He told me to keep at it because "if you're hungry enough, you'll do really well at this business."

I suppose my hunger subsided at some point because I chose the kinder, gentler world of law practice...HA, now that's worth a laugh or two in retrospect. But I always saw those at the Bear as the renegades; the no holds barred, balls-to-the-wall boys who would suck up to clients or make marginal margin puts and calls to make big, big dollars.

In the staid world of investment banking and brokerage trading, this was an anomaly of mega-proportions. "You just don't do that," one of my mentors at small company chided. "They're gonna get in big trouble one day, you watch." Yeah, right, this from the guy who was constantly hitting on prospective clients...and me...yuck. But apparently, he was correct.

So sometime week before last, SEC Chair Christopher Cox revealed the SEC would begin looking into "rumor spreading intended to manipulate securities prices." Say what? Well, it is a federal offense to knowingly spread false information in that context. Wow. So, let's say I had this post-it and passed it on to a friend. And it said, "George treated me like crap on my date but he did tell me the Bear is short on cash. WTF?" And my "friend" turned it over to the rumor police....imagine the scenario: headline news; mug shot on newspaper front page; parents embarassed to acknowledge me and moving to France...oh the horror.

And idiocy. What about the companies that are still afloat despite rumors that, say, their president has two heads and traded his mother for a bunch of mortgage-backed securities? No, no, no, and no again. The Bear fell because it became arrogant...more arrogant...and more risque in a market that could no longer "back up" that chutzpah.

To know the Bear was to love the brokers and traders there. And I did. I admired them and emulated them and, God forbid, became a lawyer...whatever. But at the end of the day, sinking massive dollars and energy into mortgage-backed securities was a dope fiend move that no prudent company would have had the cojones to do. But Bear did. Inevitably, that ill-fated decision would have had a massive impact within and on the company...and, duh, how it would be perceived by the investment-savvy public...and, naturally, rivals.

I'll tell you this: Bear high rollers - the successful, top-o-the-line traders lived high and nicely. Cush pads; luxury cars; ridiculous vacations...oh the perks even in the 1980s were envied and highly-sought after. Now, I could care less about all that crap; but then, in the heady days of L.A. ego and material excess, it was the Nirvana we all sought shamelessly yet railed against.

So when I hear the SEC threatening using subpoena power to sift through the rumor pile to pinpoint the source that killed the Bear, I am worried because the very rumors complained of actually drove us in rival houses to work harder...and better; to rise above the short sale to longer-term investments.

In short, it was part and parcel of the business. And it is not just the investment world that is rumor driven. Look at the movie industry; the legal industry; hell, even to a degree, the medical (read PHARMACEUTICAL) industry. All of these thrive on dirt on someone else that can discredit and destroy the competition. It worked with the Bear because there was truth to the rumors. And why shouldn't traders and brokers exchange gossip and who saids on the floor or in the cubicles? One should credit, at least, the hearer of such nonsense with having the discretion to blab with some measure of...propriety. 

I heard plenty of Bear rumors, but all of it was borne of jealousy and sibling rivalry, nothing more. This time around, however, there was substance to it. And Bear suffered the fallout. I would argue that was inevitable and certainly not worth initiating what amounts to a witch hunt to find the rumormongers.