No.1 - LIQUIDITY CRISIS:  Before March 10, 2008; pace of the plunging value of mortgage-backed securities had increased, leaving Bear with fewer real assets and, therefore, insufficient collateral to secure the repo financing it needed for daily operations. Excerpt, below, from Stanton Champion website, Bear Stearns Meltdown, March 18, 2008.

"Bear's real problem was a lack of faith in their assets: mortgage securities. Over the past several weeks, the markets for these assets have simply stopped moving, meaning that in many cases buying and selling them is very difficult."

"For Bear Stearns, the problem was simply that some of their creditors wanted repayment on their repos (they wanted their money they had lent to Bear back), but Bear was unable to find enough liquidity in the market using its large portfolio of mortgage securities. In other words, Bear couldn't find enough money through additional repos and nobody would buy their mortgage securities outright. Other creditors, sensing trouble, began piling on and trying to get their money back as well. Since Bear Stearns had $75 billion more borrowed than lent, they were ultimately screwed without extra financing."

No.2 - SUBPRIME DISASTER:  Foreseeability of subprime mortgage collapse. Shortsighted About the Subprime Disaster,  By Jack Guttentag; Excerpt, below, from The Washington Post; Saturday, May 26, 2007; Page F02

"But by the summer of 2007 this creature of instinct was out of his element. He did not know how to deal with the devaluation of the firm's mortgage-backed securities and other illiquid assets. Nor did he know what to do after the situation worsened when two hedge funds that contained those same toxic assets collapsed and further poisoned the company's balance sheet. 'That was a period of not seeing the light at the end of the tunnel,' he told Fortune recently. 'It was not knowing what to do. It's not being able to make a definitive decision one way or the other, because I just couldn't tell you what was going to happen.' 

No. 5 - SUBPRIME DISASTER: Distilled to its essence, the subprime crisis is about the ability and/or willingness of people with poor credit to pay their home loans on time, month after month after month. 

There are many other factors (predatory lending practices, fraudulent credit ratings, etc.), but the bottom line is that loaning money to people with a history of late bill payments (a fairly common trait with the bad-credit crowd) is a recipe for eventual mortgage defaults. It is no more responsible than if banks hired ex-cons as security guards, or the NY Jets retained Patriots as the Jets official cinematographers.  

No. 6 - SUBPRIME DISASTER: AN  IMAGINARY CROSS-EXAMINATION OF RALPH CIOFFI.  Just wondering if Cioffi would come clean under the bright lights of the witness stand..., By Brett Sherman

1) Am I nuts, or did the entire the subprime securities machine hinge on whether an endless stream of borrowers with bad-credit (most of whom presumably do not exactly have a stellar track record when it comes to paying bills on time) kept current on mortgage payments?

2) You didn't honestly believe that your legion of low-credit leopards would change their spots (at least in the long run)? 

3) Didn't you realize that there would be mass defaults among subprime borrowers just as soon as they were faced difficult economic conditions (i.e., rising interest rates, falling home prices)? 

4) If your answers to questions 1-3 were yes, no, and yes, then isn't it true that you committed securities fraud on a truly massive scale? 

-Wait Ralph! Don't answer. Question 4 was rhetorical...

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