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By now, I am sure you have heard about the Federal Reserve bailout of Bear Stearns (in collaboration with the assistance of JP Morgan) that occurred this morning.
But do you know why this all started? It's simple. Ed Hale's 1st Mariner Bank made and egregious number of BAD loans out of its fianance unit, which it had sold to investment houses on Wall Street. The majority of these loans were sold to Bear Stearns. And that vast majority of these ALT-A loans originated out of 1st Mariner's Northern Viriginia offices, an operation (since closed) that is now under investigation by the FBI for conspiracy to commit fraud, fraud, and theft.
It should be noted that the fraud was being committed without the knowledge of 1st Mariner Bank Executive Leadership. Of course, one must wonder what operating conditions existed in the corporation that would allow that level of fraud to go undetected. It was these types of fraudulent loans that started the Bear Stearns crisis back in January -- which snowballed into the current mortage crisis we face today, and led to a $10.1 million loss for 2007 at 1st Mariner Bank.
Ed Hale once promised he would "never" sell 1st Mariner Bank. Of course, he made the same promise to depositors at Bank of Baltimore before he sold that. But with pressure on his mortgage operations, operating losses, personal lawsuits from Maryland Financial Bank, refusals to honor teller's checks by Bank of America, and a mechanics lien against his new headquarters tower, one must consider that Ed Hale is in over his head.
I am sure Bear Stearns thinks so.