William Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Steet, talks with EconTalk host Russ Roberts about the life and death of Bear Stearns. The discussion starts with how Bear Stearns and other Wall Street firms made money and how they financed their operations. The conversation then turns to the collapse of Bear Stearns's hedge funds in the summer of 2007 and how that collapse and the firm's investments in subprime mortgages led to the death of the firm in March of 2008. Cohan explains the role of borrowed money in the financial crisis and Bear Stearns in particular. The conversation concludes with the incentives facing Wall Street executives and the price they paid or didn't pay for the gambles they made with other people's money.
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