re: #353 kay1212

Bear also went down because two of its largest accounts withdrew. Whether that was a rumor started by the shorts or whether those accounts were actually transferred to another institution, I’m not sure. But that started the “run on the bank”. I agree that simply shorting can’t take a strong company down but the combo of the rumors, the trading in the company’s debt, and the {probably} naked shorting did a lot of damage. Plus, what was Bear’s business model anyway? They were getting a majority of their revenues from trading in the mortage backed securities.

Yes, those are the redemptions I mentioned, essentially, there was a rumour driven run on the bank.

However, there was also accountancy that forced massive margin call based upon Fair Valuation. They didn’t actually “lose” any money and , as others have mentioned, mortgage defaults only played a minor role.