Professors Black and Wray Confirm that Bear Pledged the Same Mortgage to Multiple Buyers
Courtesy of Washington’s Blog
I have repeatedly pointed out that mortgages were pledged to multiple buyers at the same time. See this and this.
Today, in another must-read piece, economics professors William Black and L. Randall Wray confirm:
Several banks would go after the same homeowner, each claiming to hold the same mortgage (Bear sold the same mortgage over and over).
As USA Today pointed out in 2008, Bear was one of the big players in this area:
Bear Stearns was one of the biggest underwriters of complex investments linked to mortgages. Two of its hedge funds, heavily invested in subprime mortgages, folded in July.
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Bear Stearns was linked to many other financial institutions, through the mortgage-backed securities it sponsored as well as through complex financial agreements called derivatives.
The Fed wasn’t so much concerned that 85-year-old Bear Stearns would go bankrupt, but rather that it would take other companies down with it, causing a financial meltdown.
Alot of toxic mortgages and mortgage related assets ended up on the taxpayer’s tab directly or indirectly.
For example, as Bloomberg noted in April 2009:
Maiden Lane I is a $25.7 billion portfolio of Bear Stearns securities related to commercial and residential mortgages. JPMorgan refused to buy them when it acquired Bear Stearns to avert the firm’s bankruptcy.
The Fed’s losses included writing down the value of commercial-mortgage holdings by 28 percent to $5.6 billion and residential loans by 38 percent to $937 million as of Dec. 31, the central bank said. Properties in California and Florida accounted for 45 percent of outstanding principal of the residential mortgages.
