Bloomberg Reports:Aug. 7 (Bloomberg) -- Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.
While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.
The real issue is that there is a crisis of confidence. This feeds into that perception and threatens to spread the contagion. At the very least we can expect a flurry of ill concieved protectionist legislation from a congress desperate to be seen as doing something.
8 comments:
Murst! Getting up early Dawg?
Checking the Asia overnights. Nothing hapenning. Everyone has felt the foreshocks. Now there's absolutely no excuse for anyone to be caught by the next three months of events. IMO there won't even be decent shorts or whatever because there will be more turmoil than mere declines. The markets won't price efficiently making prices irrational.
Man, If I worked at BS, I'd be downloading my client list and calling my old Havard/Yale/U Chicago buddies looking for a job, cause my current one is not long for this world.
One thing I have seen is Wall Street likes to punish a-holes.
The fact they are using that Caymen trick is just pissing gasoline onto the fire. The US govt (IRS, SEC etc) has been trying to get at all those US corporations who are offshore to beat the taxes. Now they can say there is a transparency issue and current rules do not allow proper regulation.
Expect to see Sen Chuck Schummer or one of his pals start the process to shut companies headquarted off shore from bidding on US govt contracts. W and the republicans saved their bacon the last time, but now they do not have the votes and the democrats can make hay with this.
All those companies are not going to be pleased with BS pissing everyone off trying to save their sorry hide.
I would imagine some in Wall Street move to take away BS's chair/shingle in the next couple of days.
These dirtbags remind me of KC. No balls to man up and say they screwed up royally.
3 years from now they will be a financial history footnote like the big finance houses in 01.
H.
Bear was the firm most resistant to a joint settlement with Long Term. They've always been happy to toss others under the bus to protect their business/capital. I blame that they are sort of the little brother of Wall St.
Interesting linkage: http://money.cnn.com/2007/08/06/magazines/fsb/real_estate.fsb/?postversion=2007080706
Very poor decision by Bear Stearns.
Set aside the U.S. government angle for a minute. If you were an investment bank lending money to hedge funds through your prime brokerage business, how inclined would you be to lend to an offshore hedge fund that can avoid paying back its debts?
If you had lines of credit open to offshore hedge funds, how likely would you be to make big margin calls, or simply shut off the lending spigot, when it starts sounding as if they might be trying to position themselves to get out of paying their debts?
If you were an investor in hedge funds, how likely would you be to invest in offshore funds who apparently don't have to give you any of your money back if things don't work out perfectly?
Bear Stearns may save some of the line of credit they extended to their own funds, but they will be doing serious damage to their prime brokerage unit in the process (one of their big money makers), but more importantly will only stoke the run on the hedge funds. I guarantee you that anyone with any kind of investment in any hedge fund with the name "Bear Stearns" on it is seriously thinking about lining up at the teller window for a redemption at the first opportunity.
Bear Stearns CEO reassures other Wall Street chiefs
"Jimmy Cayne, the chairman and CEO of Bear Stearns has been calling the heads of other Wall Street firms to reassure them about its financial health . . . "
The lady doth protest too much, methinks.
Jimmy Cayne, the chairman and CEO of Bear Stearns has been calling the heads of other Wall Street firms to leave them his home phone number... ;-)
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