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]

A 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]

We’ve written a lot about how Ralph Cioffi and Matthew Tannin seem to have had the misfortune of being assigned the role of fall guys for the collapse of Bear Stearns, an event in which they arguably played a minor and peripheral role. But this morning a report from National Public Radio reveals that it is far worse than that. The Feds wanted to arrest some Wall Street guys at the same time they announced the prosecutions of a bunch of mortgage originators. They were intent on arresting the guys, not letting them surrender, and perp-walking them for the photo-op. Even worse, they targeted the Bear guys because the fact that the firm had already collapsed meant the arrests wouldn’t roil the market.

Justice isn’t blind. It’s watching the markets.

How the Bear Stearns Fraud Case Unfolded [NPR]

Federal 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]

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]

A 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.

Widespread expectations that the borrowing window opened to investment banks in the midst of the Bear Stearns collapse last March will be made permanent may be misplaced, according to a longtime Fed watcher and banking expert we spoke with today. It may also explain why Lehman was so eager to shore up its balance sheet.

“All the talk coming out of the Federal Reserve about moral hazard and the unique situation we faced in March is meant to signal that the window will be closed,” he said over a bowl of gazpacho in a Soho restaurant.

The Federal Reserve is concerned that the widespread impression among Wall Street executives and investors that the Fed now stands behind investment banks may encourage excess risk taking, he said. Many are skeptical that further regulation could effectively stem risks, and fear that further entrenching the Federal Reserve in the financial system could endanger its independence.

Remarks made today by New York Federal Reserve Bank President Timothy Geithner seem to support this idea. “I know that many hope and believe that we could design our system so that supervisors would have the ability to act preemptively to diffuse pockets of risk and leverage,” he said. “I do not believe that is a desirable or realistic ambition for policy. It would fail, and the attempt would entail a level of regulation and uncertainty about the rules of the game that would offset any possible benefit.”

Lehman’s decision to raise $6.0 billion in new capital was driven in part by fear that the Federal Reserve’s borrowing window will permanently be closed to investment banks, he said. He believes the Fed has been quietly telling investment banks to expect the emergency borrowing facilities not to be renewed after they expire in September.

David Ellis asks who might “fill the hole” in the investment banking world left by the collapse of Bear Stearns. The usual names get bandied about: Blackstone, JC Flowers and Citadel are the top contenders. All three have expanded into areas traditionally dominated by investment banks. And, as Ellis points out, in the not-so-distant past we’ve seen smaller firms—Lehman Brothers, for instance—grow into Wall Street powerhouses.

This kind of speculation is fun but it’s important to remember that the brokerages and investment banks as we know them are largely a child of regulation that split commercial banking and investment banking. Many of those regulations have been reversed, which has helped lead to the consolidation we’ve seen in the past decade or so. What’s more, investment banks may now face even greater regulation—and therefore higher barriers to entry—in the form of new regulations in exchange for access to the Federal Reserve’s borrowing window. New capital requirements and leverage limits could reduce the profitability of investment banking, making it less attractive to new entrants. Ironically, the problems of the investment banks could wind up shoring up their market positions by stifling competition.

Perhaps the best case scenario is a that the coming regulatory schema could allow for a division of investment banks—with some opting for access to the Fed window in exchange for increased regulatory supervision and leverage-lowering capital requirements while others—perhaps up-and-comers like Citadel—opting to operate with more risk, more leverage and less oversight.

Filling the Bear Stearns void [CNN Money]

We’re still fascinated with the diaspora of Bear Stearns veterans. This morning Reuters tells us that Evercore Partners has picked up Daniel Celentano, who was a senior managing director at Bear Stearn specializing in bankruptcy. Evercore already has a bankruptcy practice but apparently something about the current state of the economy tells them that this is going to be a pretty good business to be in going forward.

Bear Stearns private-equity unit, Bear Stearns Merchant Banking, is expected to announce that it will be spun off into an independent company with JPMorgan Chase as its largest investor.

JPMorgan will assume around $1 billion of BSMB’s “investments and commitments.” BSMB manages around $5 billion.

Sadly, it looks like they are planning to drop the name Bear Stearns, even though they aren’t sure what to call themselves.

“Almost every rock, tree, and Greek god has been taken,” said BSMB partner Douglas Korn.

Bear Buyout Arm Ready to Fly Solo [Wall Street Journal]

Bear Stearns is gone, and now so is the portrait of fallen chief executive and company chairman Jimmy Cayne by Geoffrey Raymond, the artist who has painted Eiliot Spitzer, Jim Cramer (twice), Lloyd Blankfein and Dick Grasso. It was sold to the wife of a former Bear Stearns employee. She paid $12,000.

As regular readers know, we’ve got a thing for Wall Street history. So we’re really glad that the kids over at Portfolio put together a wonderful interactive feature detailing what happened to some of the once powerful and now vanished Wall Street firms.

What was it that prompted JP Morgan cheif Jamie Dimon to call Citigroup’s Vikram Pandit a jerk? Apparently Pandit was asking how the deal to buy Bear Stearns would affect the risk to Bear’s trading partners on certain long-term contracts. This was a crucial issue because many of Bear’s counter-parties had been unwinding contracts for fear the investment bank might collapse. As part of the deal, JP Morgan had put in place a durable guarantee that it hoped send a very strong signal that would stop the run on Bear.

But for some reason the Pandit’s question irked Mr. Dimon. “Stop being such a jerk,” he told Pandit. A little over a week later, JP Morgan would attempt to get out of the guarantee and unnamed sources started saying that JP Morgan never meant to enter into it to begin with.

Yesterday we spent quite a bit of time explaining why the loophole legend probably isn’t true. Now it seems that traders connected with the deal are lending support to this argument, saying that the notion that JP Morgan Chase’s strong guarantee of Bear Stearns liabilities was an oversight was concocted ex post facto.

“It was well known by bankers at JPM during that first weekend of negotiating that a guarantee was being baked into the deal,” an anonymous trader tells a Queens based reporter who maintains the GreenFieldsOfTheMind blog. “No idea what the conversations were at the highest levels but from the way it was described to me it did not sound like an oversight/loophole. Only after the fact was it talked about that way.”

The Loophole Legend [GFOTM]