WASHINGTON — With their arrest Thursday on a nine-count indictment, two former investment fund managers for banking titan Bear Stearns are now the public face of the nation's mortgage finance meltdown.
FBI agents made the first high-level arrests of Wall Street executives in connection with the nation's sub-prime meltdown, parading the handcuffed fund managers in front of cameras as the sun came up over Manhattan.
Despite that assessment, the pair allegedly told investors the market downturn was an "awesome opportunity" to buy, when in fact Cioffi transferred $2 million of his own money out of the fund, allegedly without disclosing that to investors who believed the pair had their own money at stake, too.
"The Bear Stearns indictments present a remarkable trail of emails regarding what the Bear Stearns managers knew, when they knew it, and what they told investors. The tale the alleged emails tell, if true, should make an investor's blood run cold," Kurt Eggert, a law professor at Chapman University in Orange, Calif., said in a written analysis of Thursday's indictment.
Although the case involves rich investors losing big sums, it has a great importance for ordinary Americans. It's a milepost in an unfolding national saga.
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