Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

When news of a new round of mortgage failures hit the markets in March 2008 and hedge funds began emptying their prime brokerage accounts, quite suddenly the haircuts Bear Stearns faced in the bilateral repo market steepened and access to trilateral repo funding was shut off. A bank that in early March had easily been able to raise $100 billion overnight in exchange for good collateral could no longer fund itself. On Thursday, March 13, with its liquidity reserve down to only $2 billion, Bear’s directors were told that $14 billion in repos would not “roll” the next day and that they were at imminent risk of running out of cash. This was a modern bank failure. There were no queuing depositors. Bear did not cater to pensioners. It died, because doubts about its business led it to be cut out of wholesale funding markets.