The double dip: Bear Stearns bought bad home loans from banks. They then repackaged the loans and sold them, in pieces, as bonds to investment trusts. Bear Stearns then demanded their money back from the home loan lenders because the assets were toxic. They didn't give the money to the bond holders. They kept it to inflate their books.
So they get rid of the liabilities by dumping them on unwary bondholders, and increase their inflow by demanding money back from home loan lenders.
Voila.
You'd think the shenanigans they'd think up would be more complicated.
As a titillating tidbit:
Bear Sterns (or rather, its corporate successor) fought valiantly to keep this lawsuit under wraps. In a motion to keep this mess secret, and the court docket away from prying public eyes:
The accusations in the Amended Complaint are conspiracy-theory fiction, with a commensurate amount of truth. With no apparent reason to do so other than to tarnish their reputations and drive up the costs of this litigation and its burden on third parties Ambac also seeks to add 10 individuals as defendants in its Amended Complaint against EMC.
Surely, that's the concern, here -- evil plaintiffs wanting to maliciously and irrationally tarnish the sterling reputations of investment bankers hailing from bailed out banks.
Anyway. They lost. Obviously. Read this stuff with a nice fluffy latte.
*The notorious Bear Stearns email, acknowledging the bullcr@p that they sold to investors.
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