Loser Bear Stearns was Never Potty-Trained: an Ill-Fated Dumping

May 14 (EIRNS) - In September, 2006, Bear Stearns, the world's largest creator of Mortgage-Backed Securities (MBS), cobbled together a company, named Everquest Financial, as part of a larger plan that Bear Stearns and other investment banks are counting on, to offload potentially billions of dollars of failing, risky MBS onto deluded retail investors. This is a desperation move as the housing bubble implodes.

The plan works as follows. Since creating Everquest Financial last Summer, Bear Stearns Asset Management packaged, from hedge funds that it controls, a total of $720 million worth of Collateralized Debt Obligations (CDOs)-- a type of exotic instrument-- and sold them to the Everquest Financial. Two-thirds of the value of these particular Bear Stearns-issued CDOs consist of MBS, which had been issued primarily against subprime mortgages. Many of the subprime mortgages are headed toward foreclosure, and Bear Stearns would like to get rid of them as fast as possible, before incurring large losses.

Within weeks, Everquest plans to launch-- under Bear Stearns direction-- an Initial Public Offering (IPO), in which members of the investing public will buy shares. This way, if part, or even all of the shaky CDOs, based upon the MBS, go under, it is the suckers of the investing public, not Bear Stearns, that will bear the full extent of the losses.

The May 11 BusinessWeek magazine warns in an article entitled, "Bear Stearns' Subprime IPO," that "If Bear Stearns can find buyers of Everquest shares, it's likely that other Wall Street banks with big exposure to the subprime market may follow its lead." This would constitute one of the biggest swindles of the past quarter-century.