Kyle Bass: Using Bears to Chase Bears On Wall Street
Bear Stearns was, in 2008, one of the five big investment banks. Kyle Bass, operating as a kind of financial assassin, is the individual primarily responsible for knocking them down and initiating an economic domino effect that culminated in a reeling deflationary depression spreading from Wall Street to the rest of the world, and still affecting people today. It went down like this: there’s a routine trading procedure called a novation. Here’s how novations work: you’re going to give a sum of money to Bob, and then Bob’s going to give it to Steve. Via Novation, you can cut out Bob and just give the money straight to Steve.
In banking, novations often have to do with mortgages and mortgage-backed securities. Novation trades, prior 2008’s meltdown, were fairly common. Kyle Bass was involved in a novation between Bear Stearns and Goldman Sachs. Through some kind of misunderstanding or other, the initial request for novation was cancelled, and Bass immediately reported the news to David Faber of C-SPAN. The information was “jazzed up”, though. Instead of saying a routine novation was refused, Faber said that Goldman Sachs “wouldn’t accept the counter-party risk” of Bear Stearns, and asked their spokesman Alan Schwartz to comment. It was around 9 AM March 12th. By 9:04 AM that same day, Goldman-Sachs sent out an additional e-mail conceding to the routine novation; but by then it was too late. Wall Street had already seen the message: Goldman Sachs wouldn’t trade with Bear Stearns, meaning their integrity as a banking institution must be compromised. Suddenly Bear Stearns couldn’t train as per the norm, and had to scramble. By the end of the week, J.P. Morgan Chase had bought out Bear Stearns for a fraction of their worth based on stock market confidence. It was but the beginning of sorrows.
Here’s what’s important about all that: Kyle Bass is the man who knocked the legs out from under Bear Stearns, and he did it by implying their collapse to a reporter looking for a juicy story. It was economic assassination, and not Bass’ first. He became famous that year for predicting the sub-prime lending market would yield collapse. The man is from Argentina and runs his sub-par hedge fund out of Dallas. He’s got ties with Cristina Fernandez de Kirchner, known socialist president of Argentina, and he routinely makes money from pharmaceutical companies by forcing their sales to plummet via special interest groups, then short-selling when the drop hits Wall Street. The man is a shyster, and his brokering is gutting the country. Even the Wall Street Journal thinks as much.