Bears Stearns "How Could This Happen ?" / Minyanville

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How Could This Happen?

“Traders and industry executives who saw lists of C.D.O.’s on offer from the Bear Stearns funds say that even as the manager of the funds, Ralph Cioffi, bought some protection against a deteriorating housing market, on balance his investments seem to be based on a belief that the subprime market would not crumble, or at least not soon," the New York Times reported this morning.

Now, that raises the following question: How would a smart hedge fund manager arrive at the belief that the subprime market would not crumble?

Probably by listening to the following experts:

-March 28, 2007: Federal Reserve Chairman Ben Bernanke said, "At this juncture ... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained."

- March 29, 2007: Treasury Secretary Henry Paulson said he thinks the economic damage from the subprime lending crisis is "contained."

- April 4, 2007: Federal Reserve Bank of Dallas President Richard Fisher said damage from the U.S. subprime mortgage market is "mostly contained."

- April 11, 2007: The subprime mortgage market is "little more than an asterisk in the overall U.S. credit economy," said Roth Capital Partners economist Donald Straszheim.

- June 12, 2007: Lehman Brothers Chief Financial Officer Chris O'Meara said Tuesday he remains confident that weakness in the nation's subprime mortgages is waning.

> Just one more example that Bernanke, Paulson & co are acting more like Spinmasters/PR-People than telling the truth like it is. With reality often so depressing no real surprise........

> Das ganze ist einmal mehr ein Beleg dafür das Bernanke, Paulson & co mehr oder weniger PR betreiben und selten reinen Weiin einchenken. Da die Realität teilweise so erschreckend ist kann man es Ihnen wohl nicht wirklich übel nehmen......