# Bear Stearns **Bear Stearns** was the fifth-largest U.S. investment bank, founded in 1923, whose near-collapse in **March 2008** was the first major casualty of the [[2008 Financial Crisis]] — and the rescue that set its template. The first cracks appeared in summer 2007, when two Bear-managed hedge funds heavily invested in subprime mortgage securities collapsed, an early signal of what was coming. In March 2008 a classic run on a [[Shadow Banking]] institution destroyed it: counterparties and lenders pulled their short-term funding, and within days the firm was insolvent. Rather than let it fail, the [[Federal Reserve]] brokered an emergency fire-sale to **JPMorgan Chase**, initially at $2 a share (against a 52-week high near $170), later raised to $10. Crucially, the Fed sweetened the deal by financing roughly $30 billion of Bear's toxic assets through a vehicle called Maiden Lane — the first time the central bank had extended its backstop to an investment bank. For the KB, Bear Stearns is the **precedent that made Lehman's fate so consequential**. The March rescue taught markets that the government would not let a major investment bank collapse — so when [[Lehman Brothers]] was allowed to fail six months later, the shock was magnified by the broken expectation. Bear is the opening illustration of [[Too Big to Fail]] in the crisis and of how thinly the regulated perimeter covered the investment banks at the center of [[Shadow Banking]]. ## See Also - [[2008 Financial Crisis]] - [[Lehman Brothers]] - [[Shadow Banking]] - [[Too Big to Fail]] - [[Financial System Timeline]] - [[Financial System Hub]]