Baupost Group manager Seth Klarman first cashed in after
betting against the housing bubble and now his fund is the lead
plaintiff in a private suit against EMC, the former Bear Stearns mortgage unit also the target of the New York AG's lawsuit against JPMorgan Chase, according to CNN Money's Stephen Gandel.
From Gandel:
...if things go Klarman's way, Baupost
alone could end up collecting about $310 million from JPMorgan, with a
big assist from the government.
Klarman's suit is one of the many
so-called put-back cases bedeviling the banks right now, in which
investors who bought mortgage bonds in the year or so leading up the
credit crisis, when loan officers were basically handing out mortgages
like candy on Halloween, are demanding their money back.
The Boston Hedge Fund manager could end up collecting $310 million
from JPM, which bought Bear Stearns and EMC in 2009. New York AG Eric
Schneiderman has superior subpoena power than Baupost has in the private
suit, but the evidence Schneiderman unearths could go a long way to
help Klarman cash in.
Klarman has returned his investors nearly 20% a year for
the past two decades and his out-of-print investment book sells for
$1,700 on Amazon.
What's more interesting is that Klarman didn't even get
burned in the financial crisis but made money betting against faulty
mortgages. His case stems from his purchasing of $160 million worth of
mortgage bonds in 2009, when they were selling for $0.40 on the dollar.
Gandel writes:
"Klarman put himself and his
investors in a position, even though he predicted better than most Wall
Street's house of cards, that they, like other investors were lied to."
The saga only bolsters Klarman's rep for being one step ahead of the country's major financial institutions.
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