This page has been archived and commenting is disabled.
The Eerie Echo Of 2007: It Really Is Bear Stearns, All Over Again
While there are numerous and often conflicting opinions about the underlying causes that lead up to the Great Financial Crisis, most agree that the proximal catalyst which finally exposed all the overvalued, illiquid "cockroaches" and confirmed that subprime "is not contained" in the process unleashing the chain of events that culminated with the collapse of Bear, Lehman and AIG, was the failure of one of Bear Stearn's credit-focused hedge funds in the early summer of 2007.
Here is how the conventional wisdom recalls this development:
On June 22, 2007, Bear Stearns pledged a collateralized loan of up to $3.2 billion to "bail out" one of its funds, the Bear Stearns High-Grade Structured Credit Fund, while negotiating with other banks to loan money against collateral to another fund, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund. CEO James Cayne and other senior executives worried about the damage to the company's reputation. The funds were invested in thinly traded collateralized debt obligations (CDOs). Merrill Lynch seized $850 million worth of the underlying collateral but only was able to auction $100 million of them. The incident sparked concern of contagion as Bear Stearns might be forced to liquidate its CDOs, prompting a mark-down of similar assets in other portfolios. Richard A. Marin, a senior executive at Bear Stearns Asset Management responsible for the two hedge funds, was replaced on June 29 by Jeffrey B. Lane, a former Vice Chairman of rival investment bank, Lehman Brothers.
The rest is history.
We bring up this part of ancient financial history, because while looking at Stone Lion Capital Partners - the first hedge fund that gated investors as reported last night (Third Avenue's likewise gating high yield fund was technically a mutual fund) - something curious emerged.
Here are the founders of Stone Lion Capital: Alan Mintz and Gregory Hanley. Those names sounded awfully familiar... and then we remembered why:
- Alan Jay Mintz, CPA, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
- Gregory Augustine Hanley, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns
In fact, the co-founder of the now-gated Stone Capital Alan Mintz, is perhaps best known for his infamous locker room showdown with Bear 's CEO Alan Schwartz. The WSJ recalls this 2008 incident vividly:
Twelve hours after agreeing to sell Bear Stearns Cos. for $2 a share, Alan Schwartz wearily made his way to the company gym for a much-needed workout. It was 6:45 a.m., March 17, and Bear Stearns's chief executive had slept little since hammering out the ugly details of his fire-sale deal with J.P. Morgan Chase & Co.
When Mr. Schwartz, already dressed in his business suit, trudged into the locker room, Alan Mintz, still in his sweaty gym clothes, made a beeline for the boss.
"How could this happen to 14,000 employees?" demanded the 46-year-old senior trader, thrusting his face uncomfortably close to Mr. Schwartz's. "Look in my eyes, and tell me how this happened!"
Two and a half months later, Mr. Schwartz still isn't quite sure. To Mr. Mintz and others, he has blamed a market tsunami he didn't see coming. He told a Senate committee last month: "I just simply have not been able to come up with anything, even with the benefit of hindsight, that would have made a difference."
Seven years later, the former Bear Stearns distressed/high yield trading head Alan Mintz' own investors will be looking into his eyes and asking "how it happened" that their monthly performance reports, which were showing just a modest loss, were in fact grossly misrepresenting the underlying performance, and more importantly, liquidity (ahem Bear Stearns High-Grade Structured Credit Fund), of the hedge fund.
As for Alan's partner, Greg Hanley, what we do know is that reason why he rushed to start Stone Capital alongside Mintz, (initially with Tudor's support), is that there would be no place for him at JPM. From 2008:
Bear Stearns' leveraged finance division - which includes high-yield bonds, leveraged loans and distressed debt - is expected to contribute as few as two senior salesmen to JPMorgan out of an estimated 75 executives who reported to Greg Hanley, head of the division, according to people who worked in it. Hanley, who did not return calls to his mobile phone, is also not planning to join JPMorgan.
Instead Hanley, alongside Mintz, exited the rubble of the insolvent Bear Stearns and joined Tudor to create Stone Lion, which ultimately became an independent entity with $2 billion in AUM.
And now, in a supreme twist of irony, Bear Stearns is back - maybe not the firm itself - but the people who were in charge of its distressed and junk bond trading group, and just like the summer of 2007, it is an ex "Bear"-run hedge fund that was the first to gate, just as the credit cycle is turning and the default cycle has begun, as we explained last week, just one day before everyone's attention finally focused on junk debt with Third Avenue's gating.
* * *
So much about the past, now what about the future, because while we know that the avalanche of redemptions is only just starting, a more pressing question is what was Stone Capital invested in, how will its "gating" impact the market, and what is the most immediate contagion pathway.
For the answer, keep your eyes open on Puerto Rico, where Stone Capital was a rather aggressive hedge fund investor in in the past year. Here is the Caribbean Business with its profile of a hedge fund that "raised $500 million to invest in Puerto Rico"
A prominent New York-based hedge fund has raised around $500 million to invest in opportunities in Puerto Rico, according to CARIBBEAN BUSINESS sources. The $2 billion Stone Lion Capital Partners LLP has created the fund to invest in "credit structures, loan portfolios, alternate financing and private assets," according to official documents obtained by CARIBBEAN BUSINESS.
"Stone Lion is one of the few hedge funds with a mandate to invest in Puerto Rico. Its team saw an opportunity, given the depreciation in asset prices and the lack of liquidity on the island. The fund is a source of capital that could partner with Puerto Rico's public and private sectors," said one source, who attended recent presentations made by the fund.
Reached by telephone, Stone Lion officials declined to comment on the fund. However, Stone Lion representatives unveiled their plans in meetings with lawmakers, government officials and local financial executives over the past month, the sources said. Participants in the meetings included Government Development Bank officials, prominent lawmakers, private bank officials as well as Puerto Rico Electric Power Authority (Prepa) and Aqueduct & Sewer Authority (Prasa) officials.
Besides participating in government- bond deals, Stone Lion is also analyzing alternatives to provide financing to Prepa and Prasa as well as private companies on the island, the sources said. The hedge fund is in discussions with a commercial bank regarding the potential purchase of a troubled loan portfolio and is analyzing the possible purchase of real estate, they added.
Stone Lion is a member of the Ad Hoc Group of hedge funds that publicly back the Puerto Rico government's fiscal efforts, which entail making the public corporations self-sufficient and shoring up central government finances. There are 20 members with more than $240 billion combined under management and holding about $4.2 billion of Puerto Rico securities. Other members include Brigade Capital Management, Fir Tree Partners, Monarch Alternative Capital LP and Perry Capital LLC.
Besides the Puerto Rico fund, Stone Lion runs an $835 million Opportunistic Credit Hedge Fund and a $625 million Liquidation Focused Fund.
Stone Lion was founded in 2008 by Alan Mintz and Gregory Hanley, who have more than 20 years' experience in credit investing, and previously served as global heads of the distressed credit and research groups at Bear Stearns & Co. The firm has vast experience in debt reorganizations and has worked on both the Detroit and Jefferson County, Ala., bankruptcies, the biggest in the U.S. municipal-debt market so far. It also has experience dealing with bond insurers, with some of Puerto Rico's outstanding debt insured.
Looks like the experience was only "vast" as long as the market was going higher. The second the bottom fell off, however, and the former Bear Stearns professionals pulled a, well... Bear Stearns.
However, we reserve judgment to declare that the second coming of Bear Stearns has truly come until we hear some iteration of this:
»
- 88 reads
- Printer-friendly version
- Send to friend
- advertisements -
Just doing the Zimbabwe economic plan with the worlds reserve currency.
Keep doing it until the currency blows.
36,000 DOW would mean
They did a 10 for 1 reverse split after losing 80% of its value.
Those guys are the bottom feeding scourge of the Earth.
Stone Lion---LMAO. Sounds like some super weed that makes you better at stealing from people after you smoke it.
These fucks get away with this, and some poor fucker is doing actual prison time for having some weed in his car.
Sgt Murtaugh: "At this moment in history, alcohol is legal. Weed ain't."
Lethal Weapon, 1987. Parallels.
In other words, what's your point?
The little people go to jail.
Too big to jail are given bonuses.
Nearly every company has a code of ethics the workers must sign. You were never told it doesn't apply to the guys at the top.
NOBODY is doing prison time just for having a little weed in their car, but go ahead and tell yourself that if it helps you work up the grievance mood you apparently relish.
Timothy Leary spent time in a Texas PRISON for the possession of Marijuana. It is THE MOST IMPORTANT MARIJUANA CASE.
http://www.theweedblog.com/marijuana-legal-history-leary-v-united-states...
BUT THIS TAKES THE CAKE...
There are SEVENTEEN PEOPLE sentenced to die in prison...FOR POT.
One of them just had a business without any knowledge of the pot...SERVING LIFE?
http://clemencyreport.org/top-10-outrageous-marijuana-sentences/
GO FUCK YOURSELF AMERIKAN PATRIOT.
You are a LYING PIECE OF SHIT.
Get the fuck out of here.
What a God DAMNED troll.
You are going to Hell and spend eternity there.
And that is the tragedy about you.
.
it is japanese custom that i receive a bonus
https://www.youtube.com/watch?v=Ftkb57JBJj8
Difference between a penis and a bonus?
Your wife'll blow your bonus.
Happy Christmas!
My wife has a way with money.
In fact, that's her philosophy: Away with money.
Merry Christmas
Makes one wonder, why is it, exactly, that Mr. Putin's approval ratings are so staggeringly enormous.
Well for one he controls the media. It IS Russia after all and he is ex KGB. Not too hard to figure out. The N. Koreans love their leader too.
From Jesse's...
When, not if.
This change is intended to ensure that there are a
significant number of senior leaders able to declare Force Majeure promptly when the situation so requires.
http://www.cmegroup.com/market-regulation/files/15-391_2.pdf Then this: http://www.reuters.com/article/cme-moves-hunnable-idUSL8N13R32N20151202Please continue. Kindly connect some more dots for me.
Very interesting Groper, especially Harriett's abrupt departure ...
Goes to show how stupid Jim Cramer is and the people that watch him are!!!!
I can't believe i'm doing this but.......... who wasn't able to get their money out of Bear Stearns?? No one. As the investment bank, not shares of the stock.
Well, these guys practice the law of usary....
The Seventh Year
1"At the end of every seven years you shall grant a remission of debts. 2"This is the manner of remission: every creditor shall release what he has loaned to his neighbor; he shall not exact it of his neighbor and his brother, because the LORD'S remission has been proclaimed.…
Deuteronomy 15:1
Like, a terrorist, who has his religions backing, a thief could use a little backing also......
So in their eyes, their religion makes it untroubling to steal from infidels....
OT/ COP 21 AGENDA ADOPTED BY THE 195 NATIONS !
A small step for planet Earth; a big step for humanity.
Now lets get Project Apollo renewables off the ground!
C'mon Elon M !
a non-binding agreement is worthless although an aspiration is better than having zero hedge.
............."We gated some folks"...........
Are you from Pendleton?
I would not answer that.
Most Bear Stearnsy since Lehman! Good article.
large building fire in LA today. news is fresh ... now. No reports on which building, but NOT downtown. could be an oil refinery, a lot of black smoke in the air. no sounds of explosions, might be accidental.
11:07 in LA. I dont see news choppers or police choppers in the sky yet ... surprising. will try to find out which location.
11:15 am lots of sirens now. kinda slow guys. we only had thick black smoke in the sky for 10 minutes. no choppers, nothing on Yahoo or MSM. don't you love the MSM ... too darn busy offering more pix of the Kardashians.
11:52 KTLA News is reporting the fire is at a large recycling yard in Harbor Gateway. There is still a lot of gray smoke, but the thick black smoke is gone. It's windy in LA - tough job for firefighters today.
I can see police and fire choppers working the scene. Somebody lost a LOT of inventory today.
Soon to be lost to the dust bin of history, the causes of the 2008 Financial Crisis started long before Bear Stearns and Lehman failed.
Here are some links in case you want to read the actual documents, and some of the discussions that went on back then when there were people that questioned the CDO's but were called fear mongers by the MSM. There are several articles here. This link jumps to Page 10 where the CDO listing starts, and there are more on Pages 11 and 12. All available for download.
Page 10 https://www.propublica.org/documents/P270
Page 11 https://www.propublica.org/documents/P300
Page 12 https://www.propublica.org/documents/P330
One of the most infamous CDO's was Magnetar, sponsored by UBS. Many of the original documents are here:
http://www.propublica.org/special/the-timeline-of-magnetars-deals
The Financial Crisis Inquiry Commission (FCIC) has links to many more of the CDO's. Usually government commissions are useless, but at least on this one they had Brooksley Born serve as a member.
http://fcic.law.stanford.edu/about
Links to a partial list of CDO's
http://fcic.law.stanford.edu/resource/staff-data-projects/cdo-Library
Something to save before they mysteriously get lost, like Lois Lerners eMails.
Thanks for the links!
Most Excellent Palladin....Many Thanks
"It Really Is Bear Stearns, All Over Again?"
I'd say , "Yup, pretty much."
The whole fucking world is levered to the hilt. Someone is gonna "fuck up" and the shit storm will follow.
Keep in mid that we've had falling/near ZIRP for what? 10 years? Look at all the traders out there(if any are left) who have never traded in a rising rate environment. It's going to be fun watching how the rookie traders and their algorithms do?
Do they have "safe spaces" for the poor little young fuck millenial traders to run hide and whine in when the shit hits the fan? LOL!!!!!
hairball
Thanks to the f ng Feds, Ben Bernanke and Granny Yellen. Oh, not to mention Timmy.
Just some more asset stripping looting.
Check out how criminal idiot putin failed BIG TIME:
https://youtu.be/QpqscEMcZ2k
The vultures are not the problem, as anyone with the slightest inkling of how economies really work knows -- a distinct minority on ZH these days. Vultures are an indicator that there is a problem. Death, specifically. Sure they ain't pretty, but they're vital to preventing the road kill from piling up.
But of course, the drivers of the cars that are serially plowing into the herd want to keep the dim wits focused on the circling carrion scavangers, up above. "Watch the little birdies!" So they can keep doing it.
True Dat, JStan....true dat
is this 1 reason banks were downgraded?
don't recall seeing it here.
http://www.bibliotecapleyades.net/sociopolitica/sociopol_globalization_eu128.htm
I am short trust!
I SAY JIM CRAMER SHOULD BE MEASURED FOR TWO BAGS OF CEMENT. HARD TO FIND ANYTHING GOOD ABOUT THIS PUMP AND DUMP LUNATIC CRIMINAL!!
Cramer got out after fair disclosure law was passed, he wasn't a genius, he had great inside info. He used to defend insider trading.
Cramer got out after fair disclosure law was passed, he wasn't a genius, he had great inside info. He used to defend insider trading.
I say we call for a moratorium on ex-Bear-Stearns employees being permitted on Wall Street “until our country’s representatives can figure out what the hell is going on!"
No Good unless it applies to Goldman Sachs, Lehman, and all the rest.
This commentary is why you put financial sociopaths in jail, or at least excommunicate the from financial industry management, after the FIRST time. Sociopaths will come back to burn you every chance you give them. Not just in finance, but in life itself. I'm not hard on folks because it wasn't until early fifties that I truly understood the word sociopath. They are smart, charming pretenders that have no conscience nor empathy. It's only when they make a mistake in their cover do you actually see them for real. Sucks.
Irony award for 2015?
The Big Short opens this weekend.
Shouldn't somebody call Hank Paulson?
Yes ... good one, let's have a party with all the same players, I'm sure this will turn out the same.
Should be Stoned lion.
Nothing happened when oil droped to 35. We were told all types of derivatives would Blow. Everyone is so aware and watching for financial casualties that more than likely any insolvency that would create market instability would be supported with Fed capital. Example, All the commodity traders that are still functioning. Nothing can be allowed to fail now given the covert financial wars of the east and west.
Give it time...Nature will take its course.
It is like that scene in the film, "Force 10 From Navarone", when the Bomb goes off in the dam and nothing seems to happen...
Give it some time. There is no escape from the consequence of the destructive acts. Just like there was no stopping those waters when that bomb detonated so it will be when the smallest of fractures appear. There is no hope of controlling it.
And the fractures are so glaringly obvious.
And all of the massive amounts of currency which they created are just like the waters behind that dam in that film. It is such a potential of stored destructive energy that it is mind boggling.
First we collapse into deflation. Then the hyperinflation to follow will make these days seem like the good ol' days if we shall so survive this chapter of this unfolding disaster.
Like a tsunami Quiet and odd. People follow the retreating surf in awe and then the wave comes...
Ah yes Tom....Force 10....+1,000 dude
Good analogy....Ed Fox and Carl Weathers...odd pairing....but the analogy is spot on....hopefully....
Ford acting wooden....Robert Shaw....gone too damned soon....
geology...time and pressure....
I got a new sign for the men's rooms at Stone Lion Capital. Hang it above the urinals.
Please don't eat the Mintz. Piss on him.
Second Warning: Get Out Of Your Bond Fund Before It’s Gated - Dave Kranzler
http://thenewsdoctors.com/?p=561388
And why are such "cretins" still "operating" ?
Gratis, Eric [the place] Holder, ex-AG covering for all of "them".
Ya know, I have spent my whole life around serving people with money. And all I have to ask is WTF?
People fly around worrying abour nothing but useless paper their whole lives? WTF?
A life lost on worrying about paper?
Are they retarded or what?
"Invisible hand of market" made that YOU serve them and THEY write the (trickle down) check.
It is un-American to ask why is that.
BTW, they do not think that their life's wasted.
Ace reporting, ZH. Really quite brilliant. Research is never wasted. Perhaps there is hope for the young to get off their knees, after all.
Well done if you don't mind me saying so. Am so very chuffed with you on this running story.
The South will rise again.
Hopefully in the North.
https://www.google.com/search?q=the+aldrich+plan&rlz=1CAACAC_enUS648US64...
The squid never sleeps.
This story is as old as mankind itself.
If you prefer the longhand version-
http://www.constitution.org/la_boetie/serv_vol.htm, written about 1780.
And Joshua slew them evil Filipinos with the jack-bone of a jaw-horse. Hurrah for Joshua! And David, who set to rest the evil Goliath with a single stone. And God Bless America!
None of that shit is real. It only exists in our minds- the true matrix.
Jim Motherfucking Cramer
Classic video clip of the total fucktard leading the sheeple.....fuck me.
That the cunt is still.....on the air....is testimony to much, much, mucho muchas sewery Jewry shit....
BearishStools....rears it's cash sucking head......
REMINDER: KICK IN BALLS HARD..... ON SIGHTING/CLOSE ENCOUNTER; JON CORZINE....THAT IS ALL
Thinkin' ya got some good tax donkeys on that island do ya?
I only watch CNBC to listen to Rick Santelli; he is the only sane person on that entire network.
ZH nailed it. It is going to be such a joy to watch what happens next. Facts be told. Liars lose.
You might hate journos, and math, economics, finance, but the writing goes on,, war cry babies, precious pets of useless politics and insolvent banks.
Joy to the world. All nations rise:
https://www.youtube.com/watch?v=wbdvo019mgM
relax folks
the indicators are just NOT there/here .. yet
the next crash ain't comin' for a while
trust me
i predicted bear stearns to the day
i predicted lehman to the day.. publicly
r
https://enronnext101.wordpress.com/
https://thereinhardtreport.wordpress.com/
google "reinhardt wall street"
Why would it not happen again or have the rules been changed?
Its all in the big "One World Odor" plan.
AmeriGEDDON > the birth of a new highly controlled world.
https://youtu.be/2366NOeOQcY
Obama Administration Welcomes Hundreds of Thousands of Muslim Refugees but says There is “No Room” for Christian Refugees!http://eaglerising.com/27470/obama-administration-welcomes-hundreds-of-t...
'Shariah police' free to 'patrol' German streetshttp://www.wnd.com/2015/12/shariah-police-free-to-patrol-german-streets/...
White House holiday television special Christmas in Washington cancelled after 33 yearshttp://news2.onlinenigeria.com/world/443085-white-house-holiday-televisi...
German police use water cannon to disperse protesters opposed to neo-Nazi marchhttps://ca.news.yahoo.com/german-police-water-cannon-disperse-protesters...
Read the comments. The opposers are all refugees, not Germans.
Russian military ship has just almost shot a Turkish fishing boat which tried to crash into it.
Turkey still tries to create WWW3...
My favorite "we can break even at $40 WTI" company,Sandrigde Energy(SD)..Share price-$.23 cents..EPS-Negative $5.63..LOL
The great thing about hedge funds, you never have to payout, instead of paying out you just go bankrupt and the tax payers can pay them out, you then start another hedge fund.