Bear Stearns Hedge Fund

Thursday, two former Bear Stearns hedge fund managers were hauled into jail and charged with lying to investors about the collapse of the subprime mortgage market. This perhaps signaled the start of a wave of prosecutions arising from the housing meltdown. Mathew Tannin and Ralph Cioffi were accused of encouraging investors to stay in their hedge funds which were heavily exposed to subprime mortgages, even as they knew the credit market was in serious trouble. These were the first criminal charges to hit Wall Stree in the housing market meltdown. They were indicted on conspiracy and fraud counts. The eventual implosion of their two hedge funds cost investors $1.8 billion and started the domino effect that led the demise of Bear Stearns itself, which barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co.

FBI Investigates Possible Loan Fraud

The Federal Bureau of Investigation said it is investigating 14 companies for possible fraud or insider trading violations in connection with loans made to risky borrowers, and investments spun off of those loans. Agency officials did not identify the companies under investigation but said the wide ranging probe, which began in Spring 2007, is ongoing and involves companies across the industry, from mortgage lenders to financial firms that bundle home loans into securities sold to investors.