Items of Interest:
Bear Stearns Fund Managers Indicted -- Former Bear Stearns executives Ralph Cioffi and Matthew Tannin were indicted on federal securities fraud charges on June 18, almost a year after the two giant hedge funds they managed collapsed. The much-anticipated indictment is the first set of high-profile criminal charges to emerge from the meltdown in the market for sophisticated securities backed by subprime-mortgages.
Prosecutors allege that Cioffi and Tannin misled investors and other Wall Street investment firms about the precarious condition of the hedge funds’ financial health, in a bid to save their professional reputations, jobs and personal investments...
Behind the Scenes of Bear’s Fund Meltdown -- What were the managers of Bear Stearns‘ hedge funds thinking as the mortgage markets began to go haywire and investors started asking for their money back? Thursday’s indictments against those former managers, Ralph R. Cioffi and Matthew Tannin, offer some fascinating clues.
The two men were arrested Thursday and charged with securities fraud related to the funds’ collapse about a year ago. The indictments quote heavily from e-mail messages that the executives sent in the months before the funds imploded, in which they expressed concern about the funds’ health and, at least once, suggested that the funds might need to be closed immediately...
In an April 22 e-mail from Mr. Tannin — which the indictment said was sent not from Mr. Tannin’s account at Bear Stearns, but from his personal account to the personal e-mail account of Mr. Cioffi’s wife — Mr. Tannin wrote:
the subprime market looks pretty damn ugly… If we believe the [CDOs report is] ANYWHERE CLOSE to accurate I think we should close the funds now. The reason for this is that if [the CDO report] is correct then the entire supbrime market is toast… If AAA bonds are systematically downgraded then there is simply no way for us to make money — ever.Three days later, Mr. Cioffi and Mr. Tannin hosted a conference call for investors in the funds. This time, his tone was very different.
Here is what Mr. Tannin said on that call, according to the indictment:
“So, from a structural point of view, from an asset point of view, from a surveillance point of view, we’re very comfortable with exactly where we are…FoxBusiness:
Details of the Bear Stearns Hedge Fund Indictments -- As we told you in an exclusive, the FBI and the Department of Justice are zeroing in on the role of hedge funds, now at the top of their hit list, with potentially more indictments against hedge fund managers in coming days (”Hedge Funds in the Crosshairs”)...
Wall Street Journal:
Prosecutors in Bear Case Focus In on Email
Law Blog / Wall Street Journal:
The ‘Perp Walk’ Debate: Prejudicial or Legit? -- We’ve visited the topic of the perp walk before, but we thought that given the former Bear Stearns hedge fund managers being forced to do the walk earlier today, it was high time to revisit the issue. Why, we asked ourselves after watching the clips, does this ritual take place, especially when a suspect might otherwise willingly turn himself in? ...
“Portraying someone in handcuffs right after an arrest really undermines the presumption of innocence, in my opinion.” ...
Wall Street Journal:
The "Perp Walk": A Visual History
Bush threatens foreclosure bill veto -- The White House opposes proposed legislation's $4 billion to help states purchase foreclosed properties with Fannie and Freddie footing the bill.
A broad bipartisan coalition supporting a massive foreclosure rescue beat back GOP efforts to gut it Thursday, defying a White House veto threat and quashing a bid to make it victim to revelations about two senators' VIP mortgages.
Administration officials said they oppose the inclusion of $4 billion in the measure to help states buy and rehabilitate foreclosed properties, and a plan to have government-sponsored mortgage giants Fannie Mae and Freddie Mac pay for the rescue...
Mortgage fraud inquiry nets hundreds -- Government official says losses in the fraud cases total about $1 billion.
Hundreds of people across the country have been arrested by law enforcement officials targeting crooked mortgage brokers, real estate agents, and other industry officials, the head of the FBI and a top Justice Department official said Thursday.
FBI Director Robert Mueller and Deputy Attorney General Mark Filip announced the arrests the same day two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, surrendered to the FBI. The men are expected to face federal charges that they intentionally misled investors in two funds that collapsed last summer under the weight of wrong-way bets on mortgage-backed securities...
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