Continued Fun at Bear Stearns & Related News / Opinions

[rose-colored-coolaid]

It is appalling. Remember, reports fraud and abuse always rise as bubbles pop. I consider this contempt for their investors to be just another pin in the bubble.

[TJ_98370]

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Bear Stearns Cos was hit on Wednesday by a legal claim stemming from the meltdown of two of its hedge funds, sending its shares, already under pressure from woes at a third fund, to a 19-month low.

The securities firm has been slapped with an arbitration claim for allegedly misleading investors about its exposure to subprime mortgages. The claim, filed with the NASD, was brought on behalf of a 73-year-old retired insurance salesman in Wisconsin who lost $500,000, according to the man's lawyers.....

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Standard & Poors is considering cutting its rating on Bear Stearns Cos.' creditworthiness, a move that could make it more expensive for the investment bank to finance deals.

The ratings agency said Friday it may downgrade Bear Stearns' comparatively strong credit rating because of the firm's exposure to the distressed mortgage and corporate buyout markets.

The announcement sent the Wall Street brokerage's shares tumbling to their lowest price since November 2005.

Bear Stearns said the issues S&P cited in considering a downgrade are affecting the entire market, and will not affect Bear Stearns more than many other companies.

"Every financial institution - Bear Stearns included - is facing an extremely challenging market environment," Chief Executive James Cayne said in a conference call.

Bear Stearns depends on a mortgage industry that is in distress right now, S&P said, noting that mortgage loans and mortgage-backed bonds are under "severe pressure." Plus, the meltdown of two hedge funds operated by Bear Stearns exposes the company to lawsuits and has damaged its reputation, S&P said.......

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Pretty dire warning from Bear Stearn's CFO....

Sam Molinaro says fixed-income market condition could be worse than the 1980s stock market fall and Internet bubble burst.

Bear Stearns Cos. Friday said it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.

Bear Stearns' chief financial officer said the shockwaves hitting lending markets, triggered by rising mortgage losses, were as bad as crises such as the Internet bubble bursting in 2001 or the 1998 collapse of hedge fund Long-Term Capital Management.

"These times are pretty significant in the fixed-income market," CFO Sam Molinaro said on a conference call with analysts. "It's been as bad as I've seen it in 22 years. The fixed-income market environment we've seen in the last eight weeks has been pretty extreme." ...
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[TJ_98370]

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Bear Stearns Cos co-president and co-chief operating officer Warren Spector resigned on Sunday, becoming a casualty of a credit risk crisis at the investment bank.

Bear Stearns said that, effective immediately, Alan Schwartz has been named the company's sole president.

Spector's departure follows Bear Stearns' assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.

Standard & Poor's warned that the recent collapse of two Bear Stearns-managed mortgage funds could hurt the company's performance and reputation for an extended period.

The collapse of the funds triggered a downturn across credit markets, put a damper on corporate buyout financing and sparked fears about Wall Street's trading and banking profits.

Spector's departure is a blow to Bear Stearns because he was regarded as a possible successor to Chairman and Chief Executive James Cayne. One analyst said Schwartz is now a strong contender to succeed Cayne......


.....Richard Bove, a bank analyst at Punk Ziegel & Co., said that as head of Bear Stearns' fixed income and asset management divisions, Spector was the executive most directly responsible for the recent failings in these businesses.

Bove said Spector may have made some questionable judgment calls, but in a note to clients Bove said he believed that some Bear Stearns peers made similar judgments and that it seemed clear top management also took part in these decisions.

Bove said Bear must now prove to its creditors that it can meet their demands to be paid back. The analyst said Bear will withstand the onslaught about to begin on its balance sheet......
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[TJ_98370]

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The customer / investor comes first at Bear Stearns!



Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.

While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.

The Bear Stearns cases may establish a precedent that would let other failed hedge funds liquidate in the Caymans, where judges have a track record of favoring management. The local monetary authority estimates that three out of four hedge funds globally are incorporated in the islands....

.....The funds, which invested in securities tied to home mortgages, collapsed amid rising defaults on subprime loans, made to people with weak credit. Bear Stearns, the fifth-largest U.S. investment firm by market value, on Aug. 5 ousted Co-President Warren Spector, who headed the mortgage and fixed-income business....

....Creditors and investors in the two funds are likely to get back ``a pittance on the dollar'' and will attack Bear Stearns's bankruptcy tactics in court, said Bill Brandt, president of Chicago-based Development Specialists Inc. His firm advises hedge fund Ritchie Capital Management Ltd. in the bankruptcies of its two life insurance funds in New York....

....Filing the funds' bankruptcy in the Caymans ``is a nice little stunt, and it may work for a while,'' Brandt said. ``Bear Stearns is trying to put a wall between themselves and these so- called rogue funds.''....
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[biliruben]

[TJ_98370]

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Wall Street bank Bear Stearns is right at the heart of the subprime mortgage meltdown. It's reeling from massive, multibillion-dollar losses at two hedge funds.

And every investor who has watched the stock collapse from more than $172 to just $117.78 in a few months is probably kicking himself for not selling at least some back at the peak, before the crisis hit.

Four savvy investors did just that.

Step forward, Alan Greenberg, Sam Molinaro, James Cayne and Warren Spector.

Who are they?

Top honchos at ... Bear Stearns. (Or they were: Spector has now left in a management shake-up. The others remain.)

Between them, the four quietly cashed out more than $57 million worth of company stock before the crisis hit.

The executives saved themselves nearly $16 million by their astutely timed sales, which were disclosed in a series of public filings.

Those losses got passed on to the unlucky outside investors who bought the stock.

Bear Stearns declined to comment.......

.......It is, perhaps, a shame that Bear Stearns' two disastrous hedge funds didn't prove as nimble and astute in their trading as the guys at the top. Instead, they were caught holding junk mortgage paper as default rates soared.

Stock sales weren't the only way top executives at Bear Stearns pocketed a fortune even as they sailed the Titanic straight at the iceberg. Company filings reveal that Bear Stearns also awarded a staggering $140 million in bonuses to top executives last year.

And by good fortune, just over half of those bonuses were paid in cash rather than in the company's fast-shrinking shares.
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[rose-colored-coolaid]

[TJ_98370]

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I want to be an investment banker! You can collect millions in advisory fees and you don't even have to give good advice. Way cool!
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Again!

A limited partner in a failed hedge fund run by Bear Stearns has sued the investment bank, saying it took only "meager steps" to prevent the fund's recent collapse.

The limited partner, Navigator Capital Partners, made the accusation this week in a lawsuit filed in New York State Supreme Court in Manhattan. The complaint names Bear Stearns, its asset management division and the High-Grade Structured Credit Strategies hedge fund, which collapsed in mid-July.

Bear Stearns said it planned a vigorous defense and called the lawsuit's allegations unjustified and without merit.

"The plaintiff is an experienced investment firm and, as described in the fund's materials, this was a high-risk, speculative investment vehicle," Bear Stearns said in a statement.

Navigator Capital, run by Steven Resnick, invested more than $700,000 in the hedge fund from August 2004 to mid-April 2005. The firm and other investors lost nearly the entire value of their investments, the lawsuit said.

"Defendants failed to disclose to investors the significant challenges facing the partnership, and the meager steps they were taking to face those
challenges, while at the same time reaping substantial fees," the suit said.

Bear Stearns Asset Management, the hedge fund's general partner, made more than $13.3 million in 2006 from advisory fees and profit-sharing before the hedge fund's demise, according to the lawsuit.
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[perplexd]