Inside the Bear Stearns Boiler Room

Interesting article about the Bear Stearns hedge funds that collapsed in the summer of 2007. At the time it seemed like a big deal but not necessarily the precursor to all the problems we eventually saw. It starts off a little slowly, but there is a lot of interesting content.

There are some funny quotes in here complaining about the marks that Goldman Sachs gave them on some of the securities they held. People were complaining that the marks were too low. I’d be interested to know what the marks would be right now.

Another interesting quote is below — amazing how little was understood by the senior execs at the time. You think that they would have learned from this rather than complaining that the firm was taken away from them last spring. They really had no clue what was going on.

By the time they did figure out what most of it was worth, the firm had miscalculated badly. “We thought there was $400 million-ish of cushion, and in fact, as it turned out, we missed by like $1 billion out of $1.5 billion,” says Friedman. “It was not even close. You would think you could get it to the nearest billion, and a lot of it was the market deteriorating dramatically in that five or six weeks. But it was just a guess to begin with.”


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