Bear Stearns built its reputation as a risk taker

Compared with its rivals, Bear Stearns is a relative newcomer to the investment banking firmament.

The company was originally founded with just $500,000 in 1923 by Joseph Bear, Robert Stearns and Harold Mayer as an equities trading house to take advantage of the thriving post-war investment climate.

World War I, with its heavy demand for capital, had seen small retail shareholders encouraged to invest in the stock market and in government bonds and the fledgling company prospered enough to survive the setbacks caused by the crash of 1929 and subsequent Great Depression.

Under chief executives Salim "Cy" Lewis and Alan "Ace" Greenberg, Bear Stearns became known as a risk taker.

In 1975, with New York City close to bankruptcy, the bank invested more than $10m in the city's bonds.

It came close to losing it all but eventually profited handsomely from the investment. The bank also placed itself in the forefront of corporate takeover activity.

The firm was described as a "breeding ground" for corporate takeover attempts, and as masterful at disguising its manoeuvres. In some instances, however, Bear Stearns' aggressiveness earned it an unsavoury reputation, such as when it embarked on proxy battles against its own clients.

After going public in 1985, James Cayne became chief executive in 1992 and adopted a more cautious approach.

However he was unable to avoid the negative attention in 1997, when it came under investigation by the SEC for its role as a clearing broker for a smaller brokerage named AR Baron, which had gone bankrupt in 1996 and defrauded its customers of $75m.

As a result of the scandal, Bear Stearns stock slumped and traded at such a discount to that of its rivals that it became the constant subject of takeover rumours.

But Cayne's caution paid off in the early 2000's when it escaped the worst of the fall out when the dot-com bubble burst.

Yet the bank, one of the last remaining independent firms on Wall Street amid the conglomerates of Citigroup, JP Morgan Chase and Morgan Stanley, could not escape the credit crunch, and had been plagued by the falling value of its sizable mortgage-backed securities business, the consequences of which resulted in the infamous "bail out."