Skip to main content

Who Screwed Bear Stearns?

  • Author:
  • Updated:

Merrill Lynch, apparently, in an effort to—get this—protect its clients. Papers recently filed in U.S. Bankruptcy Court in Manhattan reveal, among other things (like: Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund started taking a turn to negative town in early 2007, and by May began to suffer significant devaluation of its asset portfolio, resulting in a bunch o’ margin calls), that around June 20, Stan O’Neal’s Lynchettes threw their clients a bunch a bunch of life savers (butterscotch and wintergreen) and then sold off assets that were in the “enhanced” fund.
Lawyers representing liquidators in the case claim that “this resulted in further downward pressure on the relevant asset classes and a revaluation of the Enhanced Fund’s assets,” hastening the fund’s ultimate collapse. Translation: “Everyone knew these funds were just a train wreck waiting to happen, the question was, ‘when?’ If it weren’t for Merrill, it would’ve been, uh, later. Not ‘never,’ god no, but ‘later,’ as opposed to ‘earlier.’ We still would’ve failed, but, given adequate time to prepare, we probably could’ve come up with some more plausible lies about why.”
This just goes to show you that the nerve of some people can be truly astounding. It’s like, where does Merrill get off, trying to protect its own from drowning in a sinking ship. Who does Stanley O’Neal think he is, Jack Dawson? Stanley O’Neal could never be Jack Dawson (that homeless kid on Growing Pains maybe, Arnie Grape, definitely. Jim Carroll in The Basketball Diaries-- up for debate. How’s his layup? Don't answer that).
Bear Hedge Fund Sank as Merrill Protected Clients [Reuters via NYT]