Back in April before a lot of the subprime mortgage problems had become front page news I had an interesting conversation with a friend familiar with Bear Stearns and many of it employees. My friend recounted a conference in fall of 2006 in which an analyst or quantitative researcher for Bear Stearns speaking to members of the firm told them, and I paraphrase; the cdo market is going to be a debacle and the worst of it will be in fall of 2007 because that would be the anniversary of the worst excesses of mortgage lending. My friend said the response by all the fixed income folks hearing this was to discount it and the man was essentially dismissed as a humbug.
Now I of course only here this story second hand but if Bear Stearns had internal people saying this and continued on as if nothing was wrong with these deals doesn't that raise some ethical and possibly legality issues.
I once worked at Bear (25 years ago) and thought it was a very good firm.