Filed under: Deals, Bad news, Industry, Bear Stearns Cos (BSC)
The Justice Department wants to know why a hedge fund manager at Bear Stearns (NYSE: BSC) was moving his own money out of a fund with subprime mortgage exposure while telling clients that he thought problems at the fund could be managed. According to The Wall Street Journal the same executive as “holding continuing discussions in internal emails with colleagues about the worrisome state of the credit markets, and wondering aloud whether the declines in subprime securities would spell trouble for his funds.”
What this boils down to is that Bear Stearns and other investment banks do not appear to have put their clients interests first. Putting more money into troubled funds would have helped investors but would have hurt the earnings of the Wall St. brokerages.. These firms elected to help themselves.
It is almost certain that many hedge fund managers tied to massive US financial companies saw the subprime market problem coming at least several weeks before their customers found out. Disclosing the information, even at at cost, was a responsibility these executives cannot dodge now.
The hedge fund managers did the wrong thing. Whether they’re successfully prosecuted or not is another matter.
Douglas A. McIntyre is an editor at 247wallst.com.
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