Bear Seizure

The saga at Bears Stearns finally reached the crisis stage. Bear Stearns would not let investors out with losses so now it will be interesting to see if investors get anything at all back now that Merrill Lynch has seized Bear Stearns fund assets.

Investment bank Merrill Lynch has seized $400 million in assets of a troubled hedge fund at Bear Stearns Cos. Inc. and plans to sell them off, The Wall Street Journal reported in its weekend edition.

The report said Merrill Lynch had seized the assets of the High-Grade Structured Credit Strategies Enhanced Leveraged Fund, despite the sell-off by the fund's managers of nearly $4 billion in high-quality mortgage bonds to cover losses.

The losses related to subprime mortgages. Bids for the seized assets are scheduled to be negotiated starting at noon EDT on Monday, the report said.

Representatives of Bear Stearns and Merrill Lynch could not be immediately reached for comment.

Since no one wants to comment I will: This is just the start of what's to come. Many hedge funds are going to have assets seized and sold over bad bets on CDOs, the carry trade, and just plain out and out over leverage into everything.

Chronology of the Saga at Bear Sterns

1. Bear Tracks & CDOs
2. A Bear's Bath
3. Bear Seizure (This Post)
4. Massive Numbers of Lawsuits (yet to come)
   
5. Congressional Investigations (yet to come)
   

This saga has two more steps to complete and by the time it concludes here will be more scandals underway all following the same pattern: leverage troubles, redemptions halted, asset seizure, lawsuits, and investigations.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/