Richard Saperstein: "There were signs of absolute excess in the industry"

Q. What was the biggest surprise of the financial crisis?

A I was at [The Bear Stearns Cos. Inc.]. The forces that led to its demise were clearly a surprise. You have a firm that that had been around for 70 years. It became apparent the company was in grave -danger that second week of March. Management did everything it could to preserve the firm’s integrity, but the Street and market forces were overwhelming. It was indicative of a financial model that worked and thrived for decades but when we walked into 2008, it wasn’t sustainable. There were signs of absolute excess in the industry. Securities were being issued that didn’t make sense. There was a lot of fraud in trading and in creditworthiness.

It was shocking that after the rescue of Bear, [that] Lehman [Brothers Holdings Inc.] didn’t see the writing on the wall and aggressively look to reduce risk and find themselves a deep-pocketed partner. It was just completely surprising.

We knew there was stress in the system, and that ultimately got borne out by Lehman’s bankruptcy.

Richard Saperstein

— as told to Jason Kephart

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