Bears Stearns subprime unit tanking
Bob Morris @ Jun 17th 2007 15:12 - Category: Credit crisis
They could lose $6 billion. Gosh, weren’t the investment banks (who spawned the subprime mess in the first place) saying just a few months ago that everything was fine, that the subprime thing was just a tempest in a teapot?
Now Bear Stearns is being “attacked” by other hedge funds, carrion-feeders all.
They are also the largest firm being attacked by the hedge funds, who are protesting their renegotiation of mortgages with homeowners who default. These attempts to renegotiate are not due to “humanitarian instinct,” but to the fact that Bear Sterns faces paying up to 100 times the value of each defaulted mortgage, in lost derivatives bets to the hedge funds!
Translation: Bear Stearns made huge leveraged bets on subprime mortgages using borrowed money, and now other vultures are gathering to feast on the soon-to-be corpse of their hedge funds. Capitalism is SUCH an inspiring system. (And no one, to my knowledge, has ever accused a hedge fund of having a humanitarian impulse.)
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