The collapse of Bear Stearns, the country's fifth largest investment bank, is big news on Wall Street, but is it also affecting everyday people — the kind of people who work right in Bear Stearns' neighborhood?
Bear Stearns' collapse has a clear, direct impact on a few thousand people. Investors lost billions. A few thousand employees might lose their jobs.
I found some of them nervously smoking in front of company headquarters on 47th Street in Manhattan. At least, I assume they're nervous — no Bear staff would talk to me.
"We're not allowed to talk to the press. ... You have to talk to our public relations people," they say.
Public relations wouldn't talk, either.
The direct impact is a bit broader than just staff and investors.
Galal Jean, who goes by Jimmy, is sitting in a black limo in front of Bear Stearns. He's a driver with — real name here — XYZ Limo, and he drives exclusively for Bear Stearns — along with 250 other drivers at XYZ. They're all terrified, he says.
"Of course. Yeah. Very much. Because we don't know what to do now," he says. He says he's going to send his daughter to a cheaper private school.
In addition to all the people directly impacted by Bear's crisis, there's a broader, indirect impact. Bear's employees make and spend a lot of money. Losing all those high salaries might hurt real estate, luxury goods, bars and restaurants.
But how big is the secondary impact?
No Worries, Say Some Neighbors
I went right across the street from Bear Stearns to a particularly New York institution — a Jiannetto's Pizza truck. Jake Tortorello sells pizzas out of a modified bus. Half of his business, he says, is with Bear Stearns workers. But he's not worried.
"I don't think it's going to be crazy, like, the loss, no. Within a month, people will start coming out and buying pizza again," Tortorello says.
If this guy, right across the street, isn't worried, then it's hard to imagine too many other restaurants in the city are. After all, Bear's entire workforce in New York is about 8,000. That's not much in a region with 18 million people.
The impact of Bear Stearns seems to diffuse a little with every step away from its headquarters.
Halfway down the block, I found a stationery store owner who said he wouldn't notice if Bear disappeared. Another half-block, I found three shopkeepers who didn't even know Bear Stearns was in the neighborhood.
I stay on 47th Street and walk another block — to the corner of Sixth Avenue, where I find AA Pawn Shop. Its owner, Michael Rubinoff, says lately the pawn business is going great: "What can I tell you? It's growing. People need money."
The worse the economy is, the better he does, he says.
I point out that he gives desperate people credit. And his neighbor, Bear Stearns, collapsed in part because it couldn't get credit when it was desperate.
"If Bear Stearns come to me for the loan, I don't think I can afford them," he says.
We're having fun. But I realize, talking to Rubinoff, why the Bear Stearns story matters so much.
Concerns Over Credit Crunch
It's not that Bear's problems have a huge direct impact on the economy. It's that Bear's collapse is a sign, a symptom of a larger problem.
Bear was highly leveraged — it had taken big risks and needed a constant inflow of loans just to keep going. It makes sense that it'd be the first big company to collapse when credit started to dry up.
The fear is that a lot of other businesses will have trouble getting loans.
Rubinoff told me he has a million-dollar line of credit at two banks. Without that money, he says, "I will be in trouble, like Bear Stearns." He'd go out of business, he says.
If Rubinoff doesn't get credit, then he can't give loans to his customers. They won't be able to pay off their bills.
If what happened to Bear Stearns starts happening more and more — if people and businesses can't get credit — "It's gonna be really, really bad. That's what I can tell you," he says.
Of course, that's exactly what the Federal Reserve is trying so hard to prevent.