Don’t walk, run to Calculated Risk’s explanation for what really happened with those two Bear Stearn’s hedge funds:
"Let’s leave, for the moment, the question of the incredibly complex and
opaque layers of leverage, synthetic structures, derivatives swaps, and
mark-to-model valuations that transformed mere commonplace mortgage
loan write-downs into 23% losses of $600MM invested equity in
approximately 9 months on a fund created because its precursor fund,
which had dawdled along for two years or so generating a mere 1.0-1.5%
a month return, we are informed, just wasn’t good enough for the high
rollers who didn’t damn well put their money in hedge funds to earn
12-18% a year. This is really all about a bunch of subprime loans."
If you believe, as this NYTimes article apparently does, that its the fault of those pesky sub-prime borrowers defaulting, well, then you just haven’t been paying any goddamned attention.