Two former Bear Stearns hedge fund managers are among the first to take the perp-walk to court for the huge sub-prime collapse. Let the fun begin.

Ralph Cioffi and Michael Tannin (pictured in middle)were indicted by a federal grand jury in Brooklyn today. At 7AM this morning, Cioffi was arrested at his suburban home in Tenafly, NJ, while Tannin was given the cuffs at his Manhattan apartment. 7 AM is a little early for an arrest, right? Do you think they got a chance to have breakfast and read today's Wall Street Journal? Or that sweet comic book Portfolio did?

These two lovable chaps face charges of conspiracy, wire fraud, and securities fraud in trying to cover up the collapse of two major Bear Stearns hedge-funds back in the summer of 2007. Many people feel their collapse was the first sign of the sub-prime crisis that would ravage Wall Street and the economy for months. For further explanation check out the last 3 minutes of this little refresher video where these specific funds get reamed by the Brits.

According to a Bloomberg article which broke the news and provided these images, justice is on the way:

The two men were charged with misleading investors about the health of two Bear Stearns hedge funds whose implosion ignited the subprime mortgage crisis. Cioffi was also charged with insider trading in the indictment, which cites a series of e-mails between the two men. They face as much as 20 years in prison if convicted of the most serious charges.

I'd be seriously surprised if they got 20 years, but who knows, maybe they'll get hyped up as scapegoats for all the country's economic woes?

The justice department is on a roll today though, as they've also announced they have, to date, charged 400 people with crimes relating to mortgage fraud in the sub-prime crisis. These charges are a result of victims being scammed out of over $1 billion in predatory lending and foreclosure rip-offs.

No one is safe today as the lucky 400 include real estate agents, lawyers, lenders, appraisers and even some speculative borrowers.

Bloomberg news sure is busy today with the big arrest reports:

FBI Director Robert Mueller and Deputy Attorney General Mark Filip will announce the national crackdown, dubbed Operation Malicious Mortgage, this afternoon in Washington. Nearly 300 people have been arrested thus far in cities ranging from Chicago to Dallas to Miami, department officials said.

I like that name, "Operation Malicious Mortgage". Maybe they'll make a Tom Clancy novel out of it? Or better yet, a Rainbow Six/Splinter Cell game showing sniper soldiers taking out corrupt real estate agents all over the country. Pink mist ahoy!

We've waited a long time for some action from the government, but it's still too early to tell if this is an adequate response to make up for everything that went down in sub-prime. It seems like a decent start, but they better keep 'em coming.

Bloomberg: US Charges 400 In Mortgage Fraud, June 19, 2008

Bloomberg: Ex-Bear Stearns Fund Managers Indicted, June 19, 2008

Portfolio magazine shows how riveting the 'saga' of the Bear Stearns collapse can be. Will it translate well in comic book form?

An opening line of the comic asks 'what happened in those frenzied days in March?' Ooo, I think I just got chills!

Although it offers an interesting and simplified take on one of the most notable financial collapses in Wall Street history, it is definitely no Frank Miller graphic novel epic . Wouldn't it have been cool to see Jimmy Cayne get kicked into a pit of death?

Yeah, the image to the left has nothing to do with the Portfolio comic chronicling the collapse, but I can't help but think it would have been a lot more compelling if their version featured a cartoon 'Bear' driving a small car. It really captures the mood of the times.

Portfolio: The Bear Trap, June 16, 2008

We reported on Tuesday that most of Bear Stearns' employees were just lounging around at the office all day, basically getting paid to go to the gym and relax at the spa. That is, until JP Morgan completes its takeover of the deflated investment bank next month. But what else are those crazy kids up to?

Corey Lorinsky from ClusterStock interviewed a young Bear Stearns employee who described his short lifespan at the failed company in a little more detail:

Summer Training:

From the day I got there, I knew things weren't right. When we were doing Thompson training, the lady teaching the class was using Bear Stearns as an example stock. Every time she came back to the main research page, after she showed us some software feature, Bear's stock was down another $5.

On The Job:

When I got there, the job didn't seem like the horror stories I had heard. Most of the first-years weren't very busy. We would routinely congregate around each other's desks and have hour-long discussions about how crappy the market was doing.

The Crash:

The daily anti-Fed-bailout protests in our lobby were the worst. Didn't these people know they were at the wrong place? Didn't they know the people at JP Morgan still have jobs?

On Jimmy Cayne (former Bear Stearns CEO) smoking pot:

The senior level bankers pretended not to let it bother them. They printed out the pictures and pasted them all over the walls. But in reality, you could tell they were really nervous about Bear's future. They probably should have been smoking pot, too.

Now:

I'm still going into the office and being worked hard. My boss pretends that if I do quality work, I'll get an offer from JP. I wouldn't bet on it. A lot of other people just come into the office when they have to print something. Like their resumes.

There was another interesting story from the New York Times last month about a whole bunch of young college graduates whining that they were screwed out of their jobs at Bear Stearns after the company's collapse.

I understand it's a real pain to be stuck without a job but when you look into these kids' backgrounds you see they come from very wealthy families with expensive degrees from top colleges. They are the cream of the crop and this bump in the road is merely just a small setback in their otherwise very well-endowed lives. A lot of them even have other offers to 'fall-back on', as if a $70k entry-level-job with a big Wall Street bank can really be considered a 'safety option'.

And plus, since there is no way an entry level analyst could be held accountable for the Bear debacle, it will make for a great story on future job interviews -
"I see you were at Bear Stearns in March of 08?! Wowzers, tell me all about that one! Oh wait, better yet... you're just hired. You can tell me all about it on your first day, Mr. New Vice President."

Know anyone involved in all these Bear shenanigans? Shout it out in the comments.

ClusterStock: My Life At Bear Stearns: Not Just Sitting Around Waiting To Get Fired!, May 14, 2008

The Bear Stearns gang are just hangin' out at 383 and collecting those pay checks because, until the JP Morgan takeover is finalized, they can't be fired.

It was easy to fall into the trap of pitying all those unknowing Bear Stearns employees when their employer went belly-up in March. They had given years of loyal service to their company, and because of sub-prime mortgages and poor management decisions, they were all going to be living on the street.

It's hard to picture them on the street corner wearing nothing but a barrel and suspenders when New York Magazine is printing quotes from guys like this:

“I’d say 50 percent of my department comes in at some point on a given day, and the trading floor is empty. I take one call a week, maybe,” says the Bear employee. “Sometimes I have to, like, print something.”

JP Morgan is notifying thousands of former Bear bankers a week that they will be receiving the ax shortly. However, until all the paperwork is signed next month, they are free to hang out and check their direct deposit balances.

On top of that, laid-off bankers will be receiving at least three weeks of severance for every year served, plus a bonus for sticking around till the sale closes.

The article also refers to the former Bears in hibernation as becoming "spa swans and gym rats." I'm not sure if that refers to women and men respectively, or just a large collective group of metrosexual, roid-raging dudes.

Some people are not very happy about this, as noted by one commenter on the article, named Arcataberry:

"While these leeches are at the spa, I'm sweating my mortgage and the price of gas. Wall Street joins Washington at the top of the list of places Americans mistrust deeply. Gone is the cachet of brokers making sexy deals in high rises. They all look like rats to the rest of us."

I disagree. There are still plenty of sexy deals going on in high rises, those just aren't the ones getting reported in New York Magazine.

New York Mag: Bear Bankers Hibernate With Pay, May 11, 2008