CNBC's Charlie Gasparino had lunch with Jim Chanos, shortseller , who added an interesting nugget about the death of Bear Stearns.
When Bear Stearns execs like CEO Alan Schwartz said everything was fine before the end, they weren't lying, per se, but they also weren't being forthright.
Transcript courtesy CNBC:
Gasparino: SOME OF THE COMMENTS BY THE BEAR STEARNS PEOPLE ARE THAT SHORT SELLERS DOOMED BEAR. YOU WERE RIGHT IN THE MIDDLE OF THAT. THAT WEEK BEFORE THEY BLEW UP YOU WERE GETTING CALLS FROM PEOPLE AT BEARS, AT LEAST ACCORDING TO JOE’S STORY, TO GO FORWARD AND SAY EVERYTHING WAS OKAY. AND YOU DIDN’T.
Chanos: I WAS ASKED TO GO ON CNBC THAT FATEFUL FRIDAY MORNING BY TOP MANAGEMENT THE NIGHT BEFORE. I HAVE BEEN VERY PUBLIC ABOUT THAT. WE WERE CLIENTS OF BEAR STEARNS AND SAW THIS AS CLIENTS. WE WERE NOT SHORT THE STOCK. WHAT I THINK EVERYONE MISSED IN BEAR STEARNS WAS THAT THE RUN PROCEEDED THE RUMORS. AND THAT WHAT WAS HAPPENING AND BEAR STEARNS EXECUTIVES WERE BEING TECHNICALLY CORRECT THAT MONEY WASN'T LEAVING THE FIRM. THEY WERE OMITTING A VERY CRUCIAL DETAIL, THAT MONEY WAS LEAVING CASH AND MARGIN ACCOUNTS AND GOING INTO CUSTODIAN ACCOUNTS, WHICH MEANS THAT BEAR STEARNS COULDN'T BORROW ON A REPO BASES. CLIENTS LIKE ME WERE IN THE PROCESS OF MOVING FROM MARGIN ACCOUNT TO CUSTODIAN ACCOUNT.
Gasparino: DID ALAN SCHWARTZ WHEN HE CAME ON CNBC AND SPOKE WITH DAVID FABER ON WEDNESDAY, AND SAM MOLANRO WHEN HE SAID EVERYTHING WAS OK., WERE THEY LYING?
Chanos: I THINK IT WAS NUANCE. IT WAS MAYBE WHAT THE DEFINITION OF IS IS TO QUOTE A FORMER PRESIDENT. I THINK THEY MIGHT HAVE BEEN TECHNICALLY CORRECT, BUT THE IMPORTANT PART IS THAT CLIENT'S INTERNALLY MOVING FUNDS HAD AS MUCH OF AN IMPACT AS A REAL RUN.
See Also: Did Bear Stearns CEO Alan Schwartz Lie on CNBC?
