How “Activist Investors” David Einhorn and Dan Loeb Brought Their Special Talents to Bear On New Century Financial
DeepCapture, 18 February 2010
You don’t hear much about it, but the March 2007 bankruptcy of a company called New Century Financial was arguably one of the most important events leading up to the financial crisis that nearly caused a second Great Depression.
It was the demise of New Century, then the nation’s second largest mortgage lender, that triggered the collapse of the market for collateralized debt obligations. And it was the collapse in the value of collateralized debt obligations (a majority of which contained New Century mortgages) that hobbled a number of big financial firms. Once hobbled, the likes of Bear Stearns and Lehman Brothers were ripe targets for unscrupulous hedge fund managers who amplified their problems by spreading exaggerated rumors while bombarding them with illegal naked short selling.
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Testimony Concerning the State of the Financial Crisis
Mary L. Schapiro
SEC, 14 January 2010
I believe the work of the Financial Crisis Inquiry Commission (FCIC) is essential to helping policymakers and the public better understand the causes of the recent financial crisis and build a better regulatory structure. Indeed, just over seventy-five years ago, a similar Congressional committee was tasked with investigating the causes of the stock market crash of 1929. The hearings of that committee led by Ferdinand Pecora uncovered widespread fraud and abuse on Wall Street, including self-dealing and market manipulation among investment banks and their securities affiliates. The public airing of this abuse galvanized support for legislation that created the Securities and Exchange Commission in July 1934. Based on lessons learned from the Pecora investigation, Congress passed laws premised on the need to protect investors by requiring disclosure of material information and outlawing deceptive practices in the sale of securities.
PDF (29 pages): Testimony Concerning the State of the Financial Crisis