Ex-Bear Stearns managers arrested

BBC

Two former managers at investment bank Bear Stearns have been arrested in New York over their role in the collapse of the bank's hedge fund last year.

Reports say Ralph Cioffi and Matthew Tannin will face criminal charges for their role in managing hedge funds that collapsed in June 2007.

The bank's hedge funds bet on the high-risk sub-prime mortgage market in the US before it collapsed.

Authorities in Brooklyn are due to give details about the case later.

FBI spokesman Jim Margolis told the BBC the men faced criminal charges of "securities fraud related to their management of two Bear Stearns hedge funds".

The men are due to appear in the US Federal Court in Brooklyn later this afternoon local time.

If charged, the men would become the first Wall Street executives to face criminal charges related to the US sub-prime mortgage crisis.

Sub-prime mortgages, loans issued to people with a poor credit history, were repackaged as securities and sold across the globe.

The collapse of these hedge funds preceded Bear Stearns' own demise earlier this year.

In March, JP Morgan agreed to buy Bear Stearns with backing of the US Federal Reserve. The deal was approved by Bear Stearns shareholders last month.

Bear Stearns was one of the most high-profile victims of the credit crunch, which was triggered by bank losses linked to the US housing market.

The Fed took swift action over the situation at Bear Stearns to prevent problems spreading to the rest of the international financial sector.