On Wall Street, when the lines of fear and greed cross, big things tend to happen.

For instance, during the Ides of March 2008, when the board of directors of Bear Stearns, the venerable 85-year-old investment bank, realized it had little choice but to sell the company over the weekend or file for bankruptcy on Monday morning, at first it held out for a high price. The company’s stock closed on Friday afternoon at $30 per share, and it was not unreasonable for the board and management to expect that a buyer would pay a premium. That’s the way deals normally get done.

But Bear Stearns was in serious financial distress. The previous day, the Federal Reserve Bank of New York had arranged with JPMorgan Chase to provide Bear with a $30 billion line of credit so that it could open for business on Friday morning. Bear’s management thought the $30 billion would be available for 30 days. As the market realized throughout Friday just how desperate the straits were at Bear Stearns, its stock dropped 40 percent in the first half hour of trading.

Then the government dropped the hammer on the firm. That Friday afternoon, Treasury Secretary Hank Paulson called Alan Schwartz, Bear Stearns’s short-tenured CEO, as he was heading home to Greenwich after not sleeping the night before. The credit line had been pulled, Paulson told Schwartz, setting off a weekend scramble to find a buyer. Panic set in quickly.

The only serious buyer for Bear Stearns turned out to be JPMorgan Chase, which coveted ...

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