Filed under: Deals, Industry, Law, Barclays plc ADS (BCS), Bear Stearns Cos (BSC)
Whatever the legal result of Barclays‘ (NYSE: BCS) lawsuit against Bear Stearns (NYSE: BSC) over hedge fund losses, the UK bank should have know better.
Much of the current problem related to mortgage-related securities bought and held by big financial companies is why the “due diligence” was so thin.
According to Reuters, “Barclays Bank Plc accused Bear Stearns Co Inc on Wednesday of loading one of its hedge funds with about $500 million in troubled assets just weeks before it collapsed with another fund.”
Barclays has a case if Bear Stearns simply dumped risky securities into the fund without any warning. But the UK bank certainly knew the overall asset mix of the pools and was still making a bet that mortgage-related securities would do well.
Did Bear Stearns lie to Barclays? Did it mislead the large bank? Perhaps. But the greed that drove big banks to invest in these instruments wasn’t limited to Barclays. Neither was the lack of understanding about how the securities worked, or what their risks were.
Barclays can blame itself on those counts.
Douglas A. McIntyre is an editor at 247wallst.com.
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