We’re still closely following the career paths of the refugees from the collapse of Bear Stearns. Last night we learned that Matt Chasin, who ran repo financing activities for mortgage and structured products at Bear Stearns, has been hired as chief operating officer by Sorin Capital.
Chasin’s duties in this newly created position will be to manage all funding and borrowing for the firm. We’re sure Chasin’s a swell guy but we couldn’t help but gasp a bit at the audacity of placing him . Chasin’s role at Bear would have placed him at the center of the funding , debt and risk management problems that many believe brought down the bank. The guy was running SIVs for Bear.
This hire seems largely a vote of confidence in the “run on the bank” theory or perhaps even the “Bear was assassinated” theory that exculpates Bear executives. Sorin Capital founder Jim Higgins is a former Bear Stearns executive himself. He ran Bear’s commercial mortgage business, and started his career as a mortgage lender. Sorin Capital is riddled with former Bear Stearns employees. Sources familiar with the matter say that Chasin had considered moving to Sorin prior to the collapse of Bear in March.
It’s also a sign of how hedge funds are leaping on the opportunity to higher bankers dislocated by the credit crisis.
Update: We’re told that Sorin Capital made a mint shorting MBS and CMBS over the past two years, the same period hedge funds run out of Bear were taking long MBS positions that would eventually help undermine confidence in the bank.
Sorin Snags Former Bear Stearns Exec. [FinAlternatives]
Bear Stearns
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Bear Stearns Tell All Blames Goldman Sachs and Hank Paulson For Bear’s Collapse
By John CarneyA senior managing director at Bear Stearns derivatives trading desk has reportedly anonymously authored a book about the bank’s demise. The book, called “Bear Trap: The Fall of Bear Stearns and the Panic of 2008,″ was obtained by Fox Business anchor Liz Claman. It tells the story of Bear’s demise from the inside, and insists that Treasury Secretary Hank Paulson may have born a grudge against Bear Stearns stemming back from Bear’s refusal to playball when Wall Street organized to bail-out Long Term Capital Management. And, of course, it all turns out to have been a plot hatched by Goldman Sachs, which Paulson ran before going to the Treasury department.
It’s 350 pages of the minute-by-minute account of those heart-gripping, mind-blowing days in March when suddenly all confidence that was left in the nation’s 5th largest brokerage ran for the exits. “Anonymous” makes the case that leaked emails out of Goldman Sachs gave enough people enough information to start heavily shorting the stock to make major money off Bear’s demise. Keep in mind that, at the time, Bear was said to still have $17 Billion dollars in cash on the books but the authors say as soon as someone at Goldman pressed “send to all recipients” on one particular email that indicated it would no longer serve as a go-between for investors and Bear, Bear didn’t stand a chance.
The book’s publisher, an outfit we’ve never heard of called BrickTower, says it’ll reveal the identity of the anonymous on or around September 22nd, when the book will be officially released. (Galley copies for reviewers are said to be circulating today, and you can pre-order the book on Amazon.) But why should we wait until September. It’s a summer Friday. Let’s start guessing now.
Video of Claman after the jump.
Tell-All Book By ‘Anonymous’ Places Blame for Killing of ‘the Bear’ [Fox Biz]
Late Thursday afternoon, long after the markets had closed and many on Wall Street had long since evacuated for the long weekend, the Federal Reserve revealed its estimates for the value the Bear Stearns assets it accepted as collateral for the $28.9 billion loan JP Morgan Chase used to buy the firm and prevent its bankruptcy. That collateral was worth just $28.8 billion, according to the Fed.
What this means is that the decline in the collateral value has already eaten through a good chunk of the $1.15 billion of exposure JP Morgan agreed to take as part of the deal. The collateral has already declined by 3.7% in a couple of months. Much of the collateral consists of mortgage linked securities, so unless that market turns around sharply, it seems likely that taxpayers will be forced to foot the bill for Bear Stearns collapse.
Indeed, The New York Post reported this morning that a hedge fund investor in JP Morgan is predicting further declines in the collateral values. Taxpayers are on the hook for any decline past the $1.5 billion hit JP Morgan agreed to take. The Fed is being criticized for not revealing more about the assets that make up the collateral. JP Morgan says it is bound by a confidentiality agreement not to comment.
Hedge Fund Report: Bear Buyout Could Cost Taxpayers [New York Post]
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Bear Stearns
“I Absolve You:” Feds Blame Cioffi and Tannin for Misleading Wall Street
By John CarneyFederal prosecutors are investing whether Ralph Cioffi and Matthew Tannin misled not only investors but also their lenders and counterparties.
BusinessWeek reports that Ben Campbell’s office, the Brooklyn-based Eastern District, is considering further charges against the two former Bear Stearns hedge fund managers, who currently face both criminal and civil charges.
At the heart of the indictment of former Bear Stearns hedge fund managers Matthew Tannin and Ralph Cioffi is an email exchange in which Tannin questioned the performance of the funds. Federal prosecutors are treating those those emails as the smoking gun in the case against them, saying the men privately knew the funds were in trouble while they publicly reassured investors that the funds were healthy. At least one former prosecutors has described the email exchange between the two men as “dumbfounding.”
Of course, the exchange could also be read as exculpatory. As far as we can tell, the emails detail a discussion about fund performance and strategy and do not discuss attempts to deceive investors. The junior Tannin was nervous. His boss Cioffi instructs him to hold steady. These are the kind of frank and open discussions investors should hope occurs between those entrusted to manage their money. But this case seems likely to make those discussions too dangerous to hold.
The prosecution of these two Bear Stearns executives offers a bad lesson for Wall Street: If you have doubts about your strategy or returns, never put it in an email.
Two former executives at Bear Stearns have landed top positions at two very different banks. Michael Solender, who was Bear’s general counsel, has been hired by Washington Mutual as chief legal officer. He was one of a number of Bear executives who sold a number of shares in December, three months before the firm cratered. His shares were sold for around $89 per share, well above the $10 shareholders received for each share when Bear was acquired by JP Morgan Chase.
Modern Bank, a New York private bank catering to the wealthy, has named Jeff Lane as its chief executive. A money manager who briefly served head of Bear’s asset-management unit, the sixty-six year old Lane was hired by Bear in June 2007 to replace Richard Marin after two hedge funds managed by Bear collapsed. Lane had previously been CEO of Neuberger Berman until 2003, when Lehman Brothers bought the mutual fund company. At Lehman he was a vice chairman but after Lehman hired George Walker, President George Bush’s second cousin, in May 2006 as head of asset management, including the Neuberger Berman business, Lane was thought to have felt sidelined.
Ex-Bear Stearns GC Resurfaces at Lender WaMu [Law.com]
Modern Bank names former Bear exec as CEO [Wall Street Journal]
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One Bear Stearns Asset That’s Getting Bid Up: Indicted Hedge Fund Manager’s Business Card
By Bess Levin
Last week, former Bear Stearns hedge fund manager Matthew Tannin found himself sitting in a Brooklyn jail cell, charged with defrauding investors in a collapsed hedge fund. The University of San Francisco law school graduate was quickly released on bail, of course. And friends say he’s been pouring his energies into training for a triathlon.
But things are looking up! On Sunday, someone put his Bear Stearns business card up for auction on Ebay. After an initial price of just 99 cents, the card was quickly bid up to twenty dollars. The top bid is now $20.50. Bidding is set to close on Friday. The card lists Tannin’s employer as “Bear Stearns High-Grade Structured Credit Strategies, LP”–the now infamously awkward name of the hedge fund he warned his boss, Ralph Cioffi, would collapse even as they continued to ensure investors of its health. Presumably Tannin’s got loads of these things in his desk drawers, so perhaps by selectively releasing them he can raise money to cover part of his legal expenses.
Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin were indicted on charges of conspiracy, securities fraud, and wire fraud this week. Prosecutors are focusing on statements they made reassuring investors about the financial condition of their hedge fund even as it collapsed. Now professor of law at New York University points out that a former Bear Stearns CEO, Jimmy Cayne, told investors the bank had no liquidity issues. A few days later the securities firm was on the verge of bankruptcy and had to be rescued by an emergency acquisition and intervention by the Federal Reserve.
“He could be in deep trouble,” Harry First tells the New York Sun.
U.S. Sees Crime in the Credit Crisis [New York Sun]
We’re not sure quite what’s in the drinking water over at Portfolio but we want some! Yesterday Portfolio made the collapse of Bear Stearns into a graphic novel. The comic book version focuses on the “run on the bank” and the bailout/sale to JPMorgan Chase. We just wish they had put a bit more about bridge tournaments and smoking in the boys room. After all, if people had confidence in Bear Stearns management, there never would have been a run on the bank to begin with.
The Bear Trap [Portfolio]
Federal prosecutors are preparing to file criminal charges against managers of two Bear Stearns hedge funds that collapsed at the dawn of the credit crisis last year. Although it’s being described as the conclusion of a year long investigation, it seems very likely that Ralph Cioffi and Matthew Tannin there wouldn’t be facing criminal charges if Bear Stearns hadn’t collapsed.
“Of course what’s really happening here is that the hedge fund managers are taking the fall for the collapse of Bear, and the even broader reverberations from that, including the controversial merger, the bailout and the credit markets’ woe,” law professor Larry Ribstein writes. “As with Enron, the public is screaming for action. When in doubt, throw somebody in jail. The public will eventually calm down, by which time the now impoverished defendants will be in jail or being exonerated on appeal.”
We wonder if the urge to prosecute doesn’t arise from an unrealistic confidence in markets. Regulators and prosecutors believe that preserving investor confidence is their mandate. Massive losses due to innocent if colossal errors about market directions undermine market confidence but there’s little a government official can do about that. If your goal is restoring investor confidence, you’re extra-motivated to find criminal wrong-doing and fraud because you can reassure investors that their losses are do to bad apples rather than risk inherent in the markets.
The Enronization of Bear [Ideoblog]
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The Bear Stearns Name Lives On…At Least On The Lacrosse Field!
By John CarneyA few weeks after it was revealed that Bear Stearns would be acquired by JP Morgan Chase, the Wall Street Journal’s Kelly Evans reported on the unwritten fate of Bear Stearns champion lacrosse team.
“Among the remaining questions hanging over Bear Stearns Cos. is this: What happens to its lacrosse team?” Evans wrote. “Bear Stearns players are trying to keep the team together even though the firm.”
Last year the Bear Stearns team defeated rival Lehman Brothers in triple overtime. It followed this with an upset victory over Credit Suisse to the inaugural Gotham Lacrosse tournament for the Wall Street league. Now Bear Stearns has been extinguished in the world of finance, while Lehman Brothers faces challenges that have forced it to go an extraordinary fund raising spree.
The first pages of the post-acquisition fate of the Bear Stearns team will be written tomorrow. For more details, follow the jump.
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