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576 Notes to Chapter 8

25. Moody’s, Kleros Real Estate CDO III, Ltd., CDO EMS Data, last updated May 27, 2008.The fol-
lowing discussion of CMLTI 2006-NC2 relies on FCIC staff estimates based on analysis of Moody’s CDO
EMS database.
26. Ricciardi, interview.
27. For example, Kleros III tranches were in Buckingham CDO, Buckingham CDO II, and Bucking-
ham CDO III, all deals underwritten by Barclays.
28. Adelson, interview.
29. Chau, interview.
30. James Grant, “Up the Capital Structure” (December 15, 2006), in Mr. Market Miscalculates: The
Bubble Years and Beyond (Mount Jackson, VA: Axios Press, 2008), 186.
31. UBS Global CDO Group, Presentation on Product Series (POPS), January 2007.
32. Dan Sparks, interview by FCIC, June 15, 2010.
33. Dominguez, interview.
34. The ratio of the book value of assets to equity ranged from 2.5 to 28.3 times for all SIVs; the aver-
age was 13.6 times. Moody’s Investors Service, “Moody’s Special Report: Moody’s Update on Structured
Investment Vehicles,” January 16, 2008, p. 13.
35. Mark Klipsch, quoted in Colleen Marie O’Connor, “Drought of CDO Collateral Tops Concerns,”
Asset Securitization Report, October 18, 2004.
36. Bear Stearns Asset Management, Collateral Manager Presentation; Ralph Cioffi, interview by
FCIC, October 19, 2010; Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., finan-
cial statements for the year ended December 31, 2006 (total assets were $8,573,315,025); Bear Stearns
High-Grade Structured Credit Strategies Enhanced Leverage Master Fund, Ltd., financial statements for
the year ended December 31, 2006 (total assets were $9,403,235,402).
37. James Cayne, written testimony for the FCIC, Hearing on the Shadow Banking System, day 1, ses-
sion 2: Investment Banks and the Shadow Banking System, May 5, 2010, p. 2; Warren Spector, interview
by FCIC, March 30, 2010.
38. Cioffi, interview.
39. AIMA’s Illustrative Questionnaire for Due Diligence of Bear Stearns High Grade Structured
Credit Strategies Fund; Bank of America presentation to Merrill Lynch’s Board of Directors, “Bear Steams
Asset Management: What Went Wrong.”
40. Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., financial statements for
the year ended December 31, 2006; Financial Statements, Bear Stearns High-Grade Structured Credit
Strategies Enhanced Leverage Master Fund, Ltd., financial statements for the year ended December 31,
2006; BSAM fund chart prepared by JP Morgan.
41. FCIC staff calculations using data from FCIC survey of hedge funds. The hedge funds responding
to the survey had a total of $1.2 trillion in investments.
42. IMF, Global Financial Stability Report, April 2008, Table 1.2, page 23, “Typical ‘Haircut’ or Initial
Margin.”
43. Alan Schwartz, interview by FCIC, April 23, 2010.
44. Cioffi, interview.
45. Ibid.
46. Ibid.
47. Bear Stearns High-Grade Structured Credit Strategies, investor presentation, stating that “the fund
is subject to conflicts of interest.” Bear Stearns High-Grade Structured Credit Strategies Enhanced Lever-
age Fund, L.P., Preliminary Confidential Private Placement Memorandum, August 2006. Everquest Fi-
nancial Ltd., Form S-1, p. 13.
48. Bear Stearns Asset Management Collateral Manager, presentation, stating that Klio I collateral in-
cludes 73% RMBS and ABS and 27% CDOs, Klio II collateral includes 74% RMBS and ABS and 26%
CDOs, and Klio III collateral includes 74% RMBS and ABS and 26% CDOs; Cioffi, interview.
49. Everquest Financial Ltd., Form S-1, pp. 9, 3.
50. Bear Stearns Asset Management, Collateral Manager Presentation.
51. Cioffi and Tannin Compensation Table, produced by Paul, Weiss, Rifkind, Wharton & Garrison,
LLP.