Continued Fun at Bear Stearns & Related News / Opinions

[rose-colored-coolaid]

[Lake Hills Renter]

[rose-colored-coolaid]

Great article Lake Hills Renter.

And guess what, Markman is not usually a very bearish writer. Most of his posts are about specific stocks he recommends and the like. When I first saw this listed on MSN, I assumed it was from Fleckstein or the like.

One rule of thumb is when the moderates start clamoring, it's time to listen. This is true in economics, politics, and global warming.

There just seems to be a little more clamoring than usual lately.

[davidlosh@davidlosh.com]

[TJ_98370]

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This drama never seems to end --



Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund's operations, said a person involved with the effort.

Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party

More than 10% of investors in two so-called feeder funds have petitioned for the change, setting up the vote, the person said. If more than 50% of investors, as measured by capital invested in Hegel, approve, Bear will be replaced as controlling party by FTI Capital Advisors, a broker-dealer subsidiary of FTI Consulting Inc. in Washington, D.C

Lawyers at Reed Smith and some other firms representing institutional investors in the funds have complained that Bear is not cooperating in providing information on the names of all investors or on the activities that led to the funds' demise. FTI would be charged with conducting an investigation to see if there is cause to sue......

......By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said......

......Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse.
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[TJ_98370]

Now we know what caused the bad management and failure of those two hedge funds :lol: ......


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Bear Stearns Cos. Chief Executive James Cayne on Thursday denied regularly smoking marijuana, after a front-page Wall Street Journal article claimed he was frequently away from work playing golf and bridge, and sometimes smoked the drug on such outings......
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[TJ_98370]

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Bear Stearns Cos., after posting its biggest earnings decline in more than a decade, reduced subprime holdings by 50 percent in the past two months, limiting writedowns in the fourth quarter to $1.2 billion......
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[TJ_98370]

Investors in London have successfully wrested control of one of the collapsed Bear Stearns hedge funds from its previous management and directors as a first step towards seeking recovery of some of their losses....

[TJ_98370]

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This article provides a good overview:
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[TJ_98370]

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Bear Stearns Cos. said Thursday a bigger-than-expected writedown in its mortgage portfolio caused the nation's fifth-largest U.S. investment bank to post the first loss in its 84-year history.

It took a $1.9 billion writedown in the quarter ended Nov. 30 as its mortgage-backed securities continued to lose value amid the global credit crisis. That was much larger than the $1.2 billion it expected in November.

Bear Stearns' fiscal fourth-quarter loss, and collapse of two hedge funds it managed during the summer, prompted Chief Executive Jimmy Cayne to pass on his 2007 bonus. Members of the company's executive committee also will not receive year-end bonuses.....

......The fiscal fourth-quarter loss after paying preferred dividends was $859 million, or $6.90 per share, compared to a profit of $558 million, or $4 per share, a year earlier. The company had negative net revenue of $379 million, compared to revenue of $2.41 billion a year earlier.

The results broadly missed Wall Street expectations, as analysts were unable to get a handle on exactly how exposed Bear Stearns was to risky subprime mortgage securities. Analysts polled by Thomson Financial had expected a loss of $1.79 per share on $625.1 million of revenue for the quarter. No analyst polled by Thomson expected a loss of more than $2.45 per share......
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[TJ_98370]

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From Calculated Risk

......"If the counterparties (insurers) blow up, Bear Stearns losses will be much larger.".....


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[TJ_98370]

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A novel financing scheme used by Bear Stearns' hedge funds became a template for subprime disaster

When the subprime mortgage market began to unravel late in 2006, global bond markets barely flinched. But when two Bear Stearns (BSC) hedge funds collapsed in June, the event sparked a global credit crisis that has yet to ease. New evidence sheds light on how those hedge funds—and their managers—became star players in the subprime bust, the biggest financial disaster in decades. The revelations also show how other players in the mortgage market adopted the Bear funds' tactics, collectively building a financing structure with many of the hallmarks of a pyramid scheme.......
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[TJ_98370]

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Barclays is suing Bear Stearns for allegedly misleading it over the performance of two collapsed hedge funds that were used as collateral for a $400 million (£200 million) loan......

.....It (Barclays) claims that it was defrauded by the unit and Matthew Tannin, a Bear Stearns fund manager, with the help of Ralph Cioffi, another executive....

.....Barclays alleges that Mr Cioffi and Mr Tannin misled it over the value and security of the funds, the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund.

In the court papers Barclays also claims that Bear Stearns dumped troubled investments in the riskier of the two funds.

It states: "Bear Stearns, BSAM and Cioffi hatched a plan to make more money for themselves and further to use the Enhanced Funds a repository for risky, poor-quality investments by creating a new investment vechicle called Everquest Financial Ltd ... co-led by Cioffi and through which he stood to benefit personally." ....


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[TJ_98370]

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Bear Stearns Cos.' James ``Jimmy'' Cayne plans to hand over the chief executive officer role to his hand-picked successor, staying on as chairman as the firm tries to recover from the collapse of the subprime mortgage market, a person with direct knowledge of the matter said.

Board members have been notified by Cayne, 73, that he will step down as CEO of the New York-based company, according to the person, who declined to be named because the decision isn't public. He will be succeeded by President Alan Schwartz, 57, and an announcement may be made as soon as today, the person said.

Cayne would join former Citigroup Inc. CEO Charles Prince and his counterpart at Merrill Lynch & Co., Stan O'Neal, who left after the sinking value of assets tied to mortgages eroded earnings. Bear Stearns's fourth-quarter loss of $854 million was the first in its history and the company's stock dropped 53 percent in New York trading during the past year, more than any Wall Street rival................
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[TJ_98370]

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Bear Stearns Cos., the fifth-largest U.S. securities firm, is closing a hedge fund that invested in asset-backed securities, abandoning a salvage plan after the fund plummeted at least 39 percent last year.

The Bear Stearns Asset Backed Securities fund, which in August held about $900 million of investments backed by assets including home mortgages, dropped 21.4 percent in November alone, the New York-based company told investors in a Dec. 20 letter obtained by Bloomberg News. The fund lost more than $300 million between August and the end of November.

Bear Stearns said it would return $90 million in cash to investors immediately. The fund's remaining assets, which the company valued at about $500 million as of Nov. 30, will be sold and the proceeds refunded over an unspecified period of time, according to the letter. Bear Stearns spokeswoman Jane Slater confirmed the letter's contents.....
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