Case Study – The Rise and Fall of the Bear

 

Accounting & Finance Discipline

 

Banking: Theory & Practice (FINA3304) 2021 Group Assignment

 

Due date: 5PM, 30th April 2021 via Turnitin on LMS

 

Case Study – The Rise and Fall of the Bear

 

The background reading for this group project is a well-written expose on the fall of Bear Stearns during the Global Financial Crisis that took place from 2007 to 2009. You are also provided a spreadsheet supplement with data on Bear Stearns and other key financial market data.

 

This case study addresses two issues.  First, it provides the opportunity to examine key banking issues relating to risk management of capital and liquidity.  Second, it enables students to gain an insight into the financial crisis and its causes.

 

The context is the rapid demise of Bear Stearns in early 2008 and the decision by JP Morgan Chase, encouraged by the US government, to acquire Bear Stearns rather than allow it to fail.

 

Assignment Instructions  

 

  1. You can download a copy of the case study “The Rise and Fall of the Bear and supplemental Excel file from the “Group Assignment” folder in the LMS.
  2. Assignment Submission: Please nominate a group leader for your group who will be responsible for submitting the assignment via Turnitin on LMS. Only one submission per group. NOTE: Only the student who submits the project will be able to view feedback on LMS. Please share the feedback file with your group members. The marks will be manually allocated to all group members on LMS after SPARK adjustments.
  3. Format: A4-pages. Font size: Times New Roman 12, 1.5 spacing, keep to normal margins.
  4. Maximum Length: 3,500 words (Tables, graphs and appendices can be added and are not included in the word count.). You need not include your references page in the word count.

 

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  1. Reference: Use APA 7 referencing style. https://guides.library.uwa.edu.au/apa
  2. SPARK: SPARK will be used to provide peer feedback and mediate group marking. Your individual final mark for the assignment will be weighted by the final SPA score you receive from your peers. If a team member does not contribute at all it is the group’s responsibility to refer this to the unit coordinator as they will be assigned zero if this is verified and confirmed to be true.

Not completing the SPARK evaluation for your team will result in a maximum individual SPA factor of 0.50 being applied. Hence, it is in your own interest to ensure you log on before the due date and complete your SPARK.

The released SPA factors will be preliminary and only become official after any protests are considered. Any student believing their SPARK assessment was unfair may lodge an objection. Any objection to your assessment ratings must be made in writing. Each objection must clearly outline why you believe your rating is unfair. Your protest will be reviewed and may be discussed with the other members of your team. Objections must be lodged within 3 days from the date that the SPARKPLUS assessments are released. The lodgement of an objection will be considered as a request for reassessment of the entire team. Hence if a student lodges an objection the marks for the entire team will be reassessed and released after the objection has been considered. At all times, the unit coordinator retains the right to exercise discretion in relation to application of the SPA factor to the final team mark for all team members. This discretion may be exercised particularly in situations where, in the opinion of the unit coordinator, a team member(s) has / have inadvertently or intentionally, misused SPARKPLUS.

  1. Weight: This assignment makes up 20% of final grade for the unit.
  2. Plagiarism: The University condemns all forms of plagiarism, copying and cheating as unacceptable. In past years, we had discovered incidents of academic misconduct such as plagiarism and the use of ghost writers and had taken appropriate and tough actions against such culprits.

 

 

 

 

 

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ASSIGNMENT QUESTIONS

 

  1. Bear Stearns had a reputation of being the scrappy underdog and maverick compared to the other “white shoe” investment banks on Wall Street. Over the years, the firm had developed a renegade, cutthroat culture that stemmed from its dominant position in bond trading.  Do you think this culture played a role in its demise? (15% of total mark)

 

  1. It is striking that a firm could fall so far so fast. On March 10, SEC Chairman Christopher Cox described Bear Stearns as being ‘well capitalized’.  Do you agree with his assessment?  Could a financial institution be adequately capitalized today and fail tomorrow?  (30% of total mark)

(Notes: Consider the type of financial institution that defines Bear Stearns and the relationship between the formal banking system and the shadow banking system. Compare and contrast its balance sheet with other similar FIs and dissimilar FIs to get evidence to support your argument.)

 

  1. Why do you think JP Morgan Chase was the firm the government turned to for bailing out Bear Stearns? Should JP Morgan Chase have bought Bear Stearns?  (25% of total mark) 

 

  1. What would happen to the financial system and markets if Bear Stearns were allowed to fail? Is it possible that allowing Bear to fail could have been an appropriate response? (20% of total mark)

 

10% of total mark – General presentation, sentence structure, grammar and referencing. 

(Coherence and clarity of arguments are graded within each question’s allocated mark.)

Final note: Remember the key concepts you have learned in the unit thus far.  A good answer is distinguished by the strength of the arguments which will be supported by evidence (financial data analysis and anecdotal) from the materials provided and your own sources of research which must be referenced.  There is a wealth of information in the Excel spreadsheet that can help provide support to your arguments, so examine closely.