Behind Bear's fall

Wed Aug 29, 2007


The collapse of two Bear Stearns structured credit funds points out what can go wrong at a bank-run platform


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 that...

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