They involved current or former employees of three prominent Wall Street banks--UBS, Morgan Stanley and Bear Stearns--three hedge funds, two broker-dealers and a couple of day traders.
Then came the first quarter of 2008, the market turbulence that washed out Bear Stearns--and a pink slip.
Perhaps Bear Stearns--the smallest of the major investment banks, but among the most heavily exposed to the mortgage market--was the easiest target.
Executives from Bear Stearns have said self-interested short-sellers might have contributed to the precipitous decline in Bear Stearns' shares, which, in turn, may have stoked the rumors.
Meanwhile, Goldman Sachs Group (nyse: GS - news - people ) and Bear Stearns (nyse: BSC - news - people ) got into the act.
In June Saudi Arabia's Prince Mishaal bin Abdullah bin Turki al-Saud joined forces with Bear Stearns (nyse: BSC - news - people ) to create an asset management firm to guide wealthy Saudi families.
In recent days, analysts who follow Wall Street banks have been slashing their estimates for first-quarter earnings, which for Goldman, Lehman, Morgan Stanley (nyse: MS - news - people ) and Bear Stearns (nyse: BSC - news - people ), include the months of December through February.
The "repricing" has sunk some of the smarter traders, including those running two now-defunct hedge funds at Bear Stearns (nyse: BSC - news - people ), as well as the traders running money at Goldman Sachs ' (nyse: GS - news - people ) Global Alpha fund and others.
These firms, including Merrill Lynch (nyse: MER - news - people ), Bear Stearns (nyse: BSC - news - people ), Lehman Brothers (nyse: LEH - news - people ), Morgan Stanley, as well as Goldman, believe they have a stake in the future of the exchange because they support much of the business that flows through it.
The results augur similar fates for other banks that have benefited in the first six months of the year from strong trading, including Lehman Bros. (nyse: LEH - news - people ), Bear Stearns (nyse: BSC - news - people ) and Morgan Stanley (nyse: MS - news - people ), all of which will report in the coming days their fiscal third quarters ending in August.
Although the situations are different, the way the rescue plan unfolded over the weekend is eerily similar to the government-brokered buyout of Bear Stearns by JPMorgan Chase (nyse: JPM - news - people ) almost exactly four months ago.
Two were two mid-level Bear Stearns hedge fund managers who were prosecuted for fraud and acquitted.
FORBES: Oscar Win For "Inside Job" May Awaken Interest In Financial Crisis Subterfuge
The 51-year-old Bear Stearns veteran isn't predicting exactly what's ahead for his market.
Across Manhattan there are many observers--including Bear Stearns senior officers who are in dire straits from borrowing money on the shares they never sold and face financial ruin.
In the wake of the Bear Stearns blow-up, rule makers will put renewed emphasis on the cash positions of major financial institutions--a traditional gauge of a bank's ability to weather crisis.
Instead, the witnesses--Fed Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox, Treasury Undersecretary Robert Steel, New York Fed President Timothy Geithner, JPMorgan Chase Chairman and CEO JamieDimonJamie Dimon and Bear Stearns President and CEO AlanSchwartzAlan Schwartz--offered little more than a timeline of the events that led to Bear Stearns' hasty rescue three weeks ago.
JPMorgan Chase (nyse: JPM - news - people ), which rescued Bear Stearns (nyse: BSC - news - people ) last month, is expected to report a 50% drop in earnings per share.
Fiscal first-quarter profits at four big investment banks--Lehman, Goldman, Bear Stearns Cos. (nyse: BSC - news - people ), and Morgan Stanley, were up 19% on average.
Thanks in part to the credit crunch, potential rival bidders dropped out of the race earlier this year: Gerardin said that Britain's Barclays had faced serious concerns over potential wider financing issues and pulled out, while the fire-sale acquisition of beleaguered prime broker Bear Stearns meant JPMorganChase (nyse: JPM - news - people ) no longer needed to knock at Bank of America's door.
For one, the near-collapse of Bear Stearns has shown that some banks' very survival may be at stake.
It showed that deals by Merrill Lynch, First Boston, Salomon, Goldman, Pru-Bache and Bear, Stearns all had much higher default rates than Drexel deals did, even though Drexel did far and away the most and the biggest deals.
Goldman Sachs Group (nyse: GS - news - people ), Morgan Stanley and Bear Stearns Cos. (nyse: BSC - news - people ) dominate the market, particularly for equity prime brokerage, but a handful of commercial banks, including Bank of America (nyse: BAC - news - people ) and Citigroup (nyse: C - news - people ), have been chomping at the bit to get bigger.
JPMorgan Chase (nyse: JPM - news - people ) had been viewed as a possible buyer, but it is currently absorbing Bear Stearns (nyse: BSC - news - people ), putting a deal for WaMu off for the moment.
The bare-bones setup bothers Bear Stearns' Managing Director Randy S. Reiff not at all.
Her grown daughter also lost her job, as did her sister -- who worked at Bear Stearns when it collapsed.
Sitting next to Serge Milman in Broadway's trading room is Steven Girden, 36, a former o-t-c marketmaker at Bear, Stearns' risk arbitrage desk.
Federal prosecutors lost a jury trial against two former Bear Stearns Cos. hedge-fund managers accused of lying to investors about how they invested their assets.
Riccardo, a sell-side analyst at Bear Stearns, thinks Prempro sales have already bottomed out, and that the changes to the label won't further hurt sales.
Although the situations are different, the way the rescue plan unfolded over the weekend is eerily similar to the government-brokered buyout of Bear Stearns by JPMorgan Chase almost exactly four months ago.
So far, government prosecutors have mostly focused on the lower level contributors to the current financial meltdown, such as mortgage brokers who approved fraudulent applications, and some hedge-fund managers at Bear Stearns who allegedly misrepresented the health of their funds.
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