Bear Reveals Plunge in Sales, Trading

As of March 24, customer margin balances, an important measure of how much money hedge funds and other trading firms are borrowing from the firm to make transactions, had shrunk 23% to $66 billion from $86 billion on Nov. 30. In disclosing the exodus of hedge funds and other clients who use Bear's clearing services, also known as its prime-brokerage unit, to borrow money for trades and obtain other trading services, Bear added that customer short positions -- or bets that certain securities would fall, made by borrowing stock from Bear -- had fallen to $66 billion at March 24, a 25% drop from Nov. 30. "A substantial number of prime brokerage clients have moved accounts to other clearing brokers," Bear Stearns said. Summary of Liquidity Review Lazard reviewed Bear Stearns’ management’s estimates of Bear Stearns’ liquidity during the period leading up to the execution of the merger agreement. On March 10, 2008, management estimated that Bear Stearns had available liquidity equal to approximately $18.3 billion. As of March 14, 2008, management estimated that this amount had decreased to no more than $4.8 billion, and Bear Stearns had anticipated funding requirements of between $60 billion and $100 billion assuming counterparties to secured repo facilities were unwilling to renew these facilities on March 17, 2008. In addition, as of March 21, 2007, management estimated that Bear Stearns had little to no available liquidity.