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598 Notes to Chapter 12

41. Matt Tannin, Bear Stearns, email from Gmail account to Ralph Cioffi, Bear Stearns, at his Hotmail
account, April 22, 2007.
42. BSAM Conference Call, April 25, 2007, transcript.
43. Iris Semic, email to Matthew Tannin et al., May 1, 2007.
44. Robert Ervin, email to Ralph Cioffi et al., May 1, 2007; email from Goldman (ficc-ops-cdopricing)
to rervin@bear.com, May 1, 2007.
45. BSAM Pricing Committee minutes, June 5, 2007; Robert Ervin, email to Greg Quental et al., May
10, 2007, showing that losses for the High Grade fund would be 7.02% if BSAM used the prices Lehman’s
repo desk was using, rather than 11.45%—the loss without Lehman’s marks.
46. Email from “BSAM Hedge Fund Product Management (Generic),” May 16, 2007, produced by
JP Morgan.
47. BSAMFCIC-e0000013. An untitled chart produced by JPMorgan shows losses would have been
over $50 million less; NAV estimate reconciliation chart, produced by JPMorgan, shows losses would
have been almost $25 million less.
48. BSAM Pricing Committee minutes, June 4, 2007.
49. Ralph Cioffi, interview by FCIC, October 19, 2010.
50. Ralph Cioffi, email to John Geissinger, June 6, 2007.
51. Schwartz, interview.
52. Ibid.
53. Ibid.; CSE Program Memorandum to Erik Sirri and others through Matthew Eichner, July 5, 2007.
54. CSE Program Memorandum, July 5, 2007.
55. CSE Program Memorandum, July 5, 2007; Merrill Lynch analysis, “Bear Stearns Asset Mgm’t:
What Went Wrong”; Paul Friedman, interview by FCIC, April 28, 2010. While most of the Bear Stearns
executives interviewed by FCIC staff did not recall the percentage discount at which the collateral seized
by Merrill Lynch was auctioned, they did believe that it was significant (e.g., Robert Upton, interview by
FCIC, April 13, 2010).
56. “While the High Grade fund was not in default/had not missed any margin calls, creditors were
cutting off its liquidity by increasing haircuts or not rolling repo facilities.” Bear Stearns Packet dated
May 30, meeting held on June 20, produced by the Securities and Exchange Commission, p. 3; Upton,
interview.
57. Warren Spector, email to Mary Kay Scucci, April 26, 2007.
58. Friedman, interview; Warren Spector, interview by FCIC, March 30, 2010; Sam Molinaro, inter-
view by FCIC, April 9, 2010.
59. Thomas Marano, interview by FCIC, April 19, 2010; Spector, interview (on Marano’s being sent to
Marin).
60. Fed Chairman Ben S. Bernanke, letter to FCIC Chairman Phil Angelides, December 21, 2010.
61. James Cayne, interview by FCIC, April 21, 2010.
62. SEC, “Risk Management Reviews of Consolidated Supervised Entities,” memo to Erik Sirri and
others, August 3, 2007, p. 2; SEC, “Risk Management Reviews of Consolidated Supervised Entities,”
memo to Erik Sirri and others, July 5, 2007, p. 3, both produced by SEC.
63. Marano, interview.
64. Bill Jamison, internal email, June 21, 2007, produced by Federated.
65. JPMorgan, Directors Risk Policy Committee, “Worldwide Securities Services Risk Review,” Sep-
tember 18, 2007; Michael Alix, interview by FCIC, April 8, 2010.
66. For the downgrades, see Moody’s Investor Service, “Announcement: Moody’s Downgrades Sub-
prime First-Lien RMBS,” July 10, 2007; Standard & Poor’s, “S&PCorrect: 612 U.S. Subprime RMBS
Classes Put on Watch Neg; Methodology Revisions Announced,” July 10, 2007; Standard & Poor’s, “Vari-
ous U.S. First-Lien Subprime RMBS Classes Downgraded,” July 12, 2007, p. 2; Glenn Costello, “U.S. Sub-
prime Rating Surveillance Update,” Fitch Ratings, July 2007.
67. FCIC, “Preliminary Staff Report: Credit Ratings and the Financial Crisis,” June 2, 2010, p. 29.
68. Steven Eisman and Tom Warrack, Standard & Poor’s Structured Finance, July 10, 2007, teleconfer-
ence, transcript, p. 16.
69. Andrew Forster, telephone conversation, July 11, 2007, transcript, pp. 3–5.