Money managers may start to move their business away from Bear Stearns, according to a low-profile manager of a large investment fund. He tells us that he is pulling away from doing business with Bear Stearns and that casual conversations with colleagues indicate that others may be making similar moves.
Bear Stearns has turned off some money managers with what sometimes appears to be a cavalier attitude towards lenders and other counter-parties. Today the Wall Street Journal reported that Barclay’s was suing Bear Stearns after two funds to which the British bank had lent money collapsed, leaving Barclays with holding the bag. Bear’s response—basically that Barclays should have known that it was risky to lend to the funds—has not endeared fund managers to Bear.
“They bragged about not having the firm’s money in the funds that had their name on it, and then told creditors to take a flying leap,” the fund manager said. “They’re a toxic counter-party. I don’t want them involved in any of my trades, in any way.”
Bear also owned a significant minority stake in ACA, the small bond insurer downgraded yesterday by Standard & Poor’s. Although Bear didn’t have a managerial role in ACA, it’s potential collapse does not sit well with some managers already wary of what the fund manager who spoke to DealBreaker called “the Bear curse.”
“To me, the report that their losses weren’t as bad as they might have been is just another stick in the eye to investors in their funds and counter-parties who lost money with these guys. I’m sure their shareholders are happy,” he said. “But let’s see how happy they are when Bear starts to lose business. People think reputational risk is hooey. Well, they’ll see.”
We didn’t contact Bear Stearns about this story because they still haven’t given us a reasonable explanation for why they blocked DealBreaker. So we’re counter-blocking them by not asking them to tell us they won’t comment on the story.
Update: More on the decline of Bear Stearn’s prime brokerage business from the Financial Times. “Bear’s decline in prime brokerage began about three years ago and has been accelerated by its recent mortgage-related troubles, including the collapse of two hedge funds run by the bank’s asset management division,” write Ben White and Deborah Brewster. “The troubles have raised questions about its financial stability.”
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
let’s just all reminisce our way back to the LTCM blow-up. My, this sounds awfully familiar…
Female CNBC anchor just stated “yesterday had Rick Santelli jumping out of his pants!”
see ya there bess?
http://gawker.com/336259/4000-horny-jews-to-storm-meatpacking-district-against-christ
What If you blew up a hedge fund but didn’t really liquidate the assets because you have some free balance sheet and moved them to various trading books across the firm at off market levels and then never sell the positions from the traders book. Would that be considered a lapse in judgment? Or would it be visionary leadership?
“counter-blocking Bear”?
Carney, that’s some mf objective journalism!
That’ll teach these Bears!
Will Bess be at Hammerstein tonight for the ML FICC party?
Is it any surprise that one of the largest shareholders in BSC stock is a firm out of Dallas? Fucking Idiot Texans.
Bear can feel free to respond in our comments section.
carney you are hilarious today
Well I got some good trim last night and he gave me the law enforcement rate.
Bear doesn’t own ACA, Bear Sterns Merchant Banking does. This distinction matters. A lot.
Hairy Bear – It’s visionary leadership if you tell all the investors that their money is completely gone and keep all the profits yourself.
That said, Reputational Risk in this case IS hooey. If people took Reputation Risk and BSC seriously, their Clearing business would have gone away years ago, instead of being the other profitable area.
It’s time to close the shit-shack aka Bear Strearns down. Arrogance and short-sightedness gets you nowhere. How interesting that Bear insiders were allowed to liquidate their positions while investors were not, basically the investors took in the ass w/no vaseline.
Hmmm. That should have been “the o/t/h/e/r/ profitable area.” So much for that html tag.
anyone hear rumblings about Molinaro taking the helm at Bear?
This would be making a shitty situation even shittier
Bear uses 3.14% of its brain.
I agree with Anonymous @ 3.42 pm. Pretty weird journalism, even for a website long on satirical excess.
The only reporting in the DB story was a long quote from an unnamed source claiming Bear Stearns was losing money managers’ business because it was considered a “toxic counter-party.” DB “counter blocked” Bear Stearns by refusing to ask for a comment in response.
That’s a lot of biting without any satire to go along with it.
True, I doubt that there would be any point to asking Bear Stearns for a comment. I would be amazed if anyone in the Bear Stearns’ PR office returned a call to DB after the posting of the Jimmy Cayne video. I think Bear Stearns wrote off their DB reputational losses a long time ago.
l
@Disp Ob 1.24am – thats exactly the problem – not seeing or understanding how the internet works. News today is viral in nature, the neg rep stuff expands geometrically. Whispers in the wind become hurricanes immediately