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House of cards is written by William Cohan, who explains Bear Stearns’ fall. One of the biggest banks for investment known as Bear Stearns in the United States, failed due to holding high stock on its balance sheets of collaterals backed up by mortgages(Cohan, 2010). This event is paramount and should be included in the timeline.
The failure of the investment bank is important as it reflects the inability of the management to mitigate risks. According to Cohan, the managers overlooked the fact that huge inventories supported by mortgages whose rate of default was growing were similarly falling due to the collateral used for the mortgage(2010). The event is essential because of the statement made by the hedge fund manager that bank was insolvent.
In conclusion, the event of the house of cards that indicated failure was the default rate of mortgages that were offered as collateral whose value also depreciated. Further, the big pronouncement by the hedge manager of the investment bank being insolvent indicated the bank’s failure. Lastly, the buyback share option facilitated the collapse of Bear Stearns.
Reference
Cohan, W. (2010).House of cards. Anchor Books.
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