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CNBC caused Bear Stearns Collapse???

July 2, 2008

Is CNBC responsible for downfall of Bear Sterns? In the upcoming issue of Vanity Fair, the collapse of Bear Stearns, that is the argument. On the morning of March 10th, CNBC began reporting a rumor that Bear Stearns was having liquidity problems. That sent shockwaves through the system and Vanity Fair’s author is proposing that CNBC was the root cause of the final collapse:

…Yet CNBC’s coverage remained anything but skeptical of the rumor. At two the network’s new “money honey,” Erin Burnett, headlined the hour by announcing “credit issues at Bear,” never mind that there was no such thing. She turned to correspondent David Faber, who observed, “Of course, no firm’s ever going to say that they are having trouble with liquidity, and, in fact, you’ve either got liquidity or you don’t. So if you don’t have it, you’re done. Those are the kinds of concerns in this market, concerns of confidence. You can have crises of confidence, causing meltdowns.”

By the end of the weekend, Bear Stearns was done. You know the rest of the story.

The destruction of a Wall Street giant all on an uncorroborated rumor fueled by CNBC correspondents that were more interested in topping each other than reporting the facts? Hard to believe, but who knows these days. Perhaps they took lessons from that NY Times writer from a few years ago…what was his name?

So, is CNBC guilty of this or just the messenger?

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Written by Andrew Horowitz · Filed Under Markets 

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6 Responses to “CNBC caused Bear Stearns Collapse???”

  1. Steve on July 4th, 2008 5:44 pm

    CNBC may have accelerated the destruction of Bear Sterns, but it certainly did not cause it. The story was pushed by big investors and CNBC ate it up, giving numerous small time investors an opportunity to hop on a momentum trade.

    Bear’s problems occurred long before CNBC ran its stories.

  2. alleycat3385 on July 5th, 2008 11:01 am

    CNBC may have caused trouble for Bear Sterns, but they also caused Capital Source to go off four dollars, to the seven dollar range, due to a false report. Looks like they are trying to take all the financial’s down as a group.

  3. Fancy a Bear Hunt? « The Midnight Special on July 6th, 2008 1:22 pm

    [...] most shockingly, the role played by a major global financial news channel in spreading the speculation. It was a perfect case [...]

  4. Finance Media » Blog Archive » The Week Ahead: Earnings onslaught begins on July 7th, 2008 5:54 am

    [...] a handle on the losses from their financial unit, General Electric shares will continue to suffer. (Read more about the unbelieveable Vanity Fair accusations) Andrew Horowitz is a money manager and the founder of Horowitz & Company. He is also the [...]

  5. chris on July 9th, 2008 11:30 pm

    I guess we should start blaming Moodys when they downgrade a bond.

  6.   Weakonomics Economic Review of 2008 by Weakonomics on January 27th, 2009 10:49 am

    [...] the sub-prime meltdown of 2008.  This will be in textbooks someday.  Additional reading:  CNBC may be to blame for causing the run on [...]

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