The collapse of two Bear Stearns structured credit funds
points out what can go wrong at a bank-run platform
By Carolyn Sargent
In hindsight, Ralph Cioffi, and the hedge funds he ran at
Bear Stearns, were always headed for a spectacular fall.
Cioffi, a 22-year Bear veteran, was no traditional hedge fund
manager, savvy from years of trading Bear's own capital - but
instead a top mortgage bond salesman. Bear allowed him not only
to run outside investor capital - but also to stuff his funds
with Bear-originated collateralized debt obligations that he
allegedly helped to form. Bear even helped Cioffi set up a
company to purchase shaky securities from the funds when the
market began to crack.
In the end, no amount of Bear Stearns support could save the
portfolios - from research touting a higher fair value for the
triple-B minus tranche of the ABX index to a proposal