Credibility Problem

By now, most people have heard about the crisis which befell Wall Street firm Bear Stearns, which suffered from what was essentially a bank run as a result of doubts about its ability to weather the credit crisis. The result was a dramatic loss of shareholder value — Bear Stearns’s stock price plummeted from around $100/share in early 2008 to around $30/share on March 14 to $2/share on March 16, which in turn led to the somewhat controversial move by the US Federal Reserve to extend an enormous line of credit to help JP Morgan acquire the flailing bank.

Suffice to say, Bear Stearns is not a bank to be looking up to right now.

Which makes this article from Reuters (hat tip: A. Phan) titled “Bear Stearns cuts Citigroup, Bank of America 2008 share view” that much more amusing:

“Bear Stearns cut its 2008 earnings estimates for Citigroup Inc and Bank of America Corp to reflect anticipated write-downs and higher credit costs.”

While, I am of the opinion that the Federal Reserve made the right choice (shoring up the financial markets by preventing one disaster from ballooning into a much larger one), that what happened to Bear Stearns is more a product of herd psychology than an underlying problem with Bear Stearns’ fundamentals, and that plenty of smart analysts still work there, I think after the past month, Bear Stearns has no business bad-mouthing other financial companies.

Unless of course, they’re making the “takes one to know one” argument here…