Bear Stearns Sale has Far-Reaching Implications

New York, NYThe recent rescue and sale of Bear Stearns has many implications for the economy, for business students and for employees of the company who had invested in Bear Stearns stock. Now, many employees are investigating a possible lawsuit against the company, alleging that fiduciaries knew or should have known about the decline in stock value.

According to the New York Times, a Federal Reserve official told a Senate Committee that Wall Street must face increased regulation to prevent further rescues similar to the Bear Stearns bail-out. The official also said that banks must do more to prevent the problems that resulted in Bear Stearns being sold.

The Senate Banking Committee called a hearing to look into the collapse of Bear Stearns and what impact that collapse has on taxpayers and regulators. The official said that Bear Stearns was rescued because the company's failure would have "severe consequences for the functioning of the broader financial system and the broader economy." Those consequences included lower incomes, higher borrowing costs, rising unemployment and lower value of retirement savings.

Alan Schwartz, chief executive of Bear Stearns, faces criticism from company shareholders for announcing on March 10, that Bear Stearns had no liquidity problems. However, just three days later, financial regulators were informed that Bear Stearns faced imminent bankruptcy. Schwartz has claimed that false rumors about Bear Stearns led to the company's troubles.

Bear Stearns stock was valued at $170 just one year ago and was recently sold for $10 a share after the company announced that it faced bankruptcy. Initially, J.P. Morgan & Chase Co. offered $2 a share for the company but the offer was later increased to $10 a share, still well below what most shareholders in the company paid to purchase the shares.

Meanwhile, business students who were offered internships or positions with Bear Stearns are now learning whether or not they still have a job with the company. Although some will keep their employment, others, whose roles would overlap with those at J.P. Morgan & Chase Co., are learning that their offer has been rescinded.

Of course, current and former employees of Bear Stearns have been hugely affected by the recent turmoil. Those who had shares in the company, many of whom thought their investment was safe, lost a lot of money in the buyout. For those employees, the money invested in company stock was their retirement savings, so they now face a retirement with much lower savings than they anticipated.

Many investors agree that investments can be risky. However, Bear Stearns stock fell a massive amount in a short time. Furthermore, Bear Stearns recently announced that the company did not face liquidity problems, a statement that may have caused employees to hold onto their stocks when the stocks could have been sold. Even though they would still have lost money on the sale at that time, employees would have had much more money to show for their shares than they do now.

If you have held shares in Bear Stearns Employee Stock Ownership Plan, contact a lawyer who can determine if you are eligible to join a class action lawsuit against Bear Stearns.