Behind the Bear Stearns hedge fund fiasco

The implosion of Bear Stearns is still making news. Business Week Online has taken a close look at confidential financial statements and has concluded that the funds were virtually built to crumble if the market turned down. Which of course it did. There was little art or science to the Bear Stearns High-Grade Structured Credit Strategies fund and High-Grade Structured Credit Strategies Enhanced Leverage. Apparently, they both merely borrowed money (lots) and bought as many CDOs as they could. Others were buying too, which drove down yields, which forced the funds to buy more. Another flaw, one fund gave Barclays the odd ability to pull the plug, which it did. And the rest is history. A proverbial cautionary tale if there ever was one.  

For more:
- here's the must-read Business Week Onlne article

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