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17 Mar, 2008


By Nicholas Paler | 12:36:12 | 17 March 2008

New Star's AAA-rated financials fund manager has warned that the interests of shareholders in Bear Stearns will now be put on the backburner following the Fed-backed takeover by JPMorgan Chase.

Guy de Blonay, who runs the New Star Global Financials Fund, warned shareholders in the stricken bank that Bear Stearns' first and foremost obligation would now be to its new owner which had taken on responsibility for the investment bank's various businesses.

He said: 'The belief is that JPMorgan is acting as the stability agent for the Fed in this transaction, and that the concern for the $2.5 trillion in notional counterparty exposure trumps the interest of the existing Bear Stearns shareholder.'

De Blonay said the debacle had been caused by a crisis of confidence exacerbated by a run on the bank, and was not a risk management issue.

He added that there could be further problems going forward for financials in both the US and elsewhere.

'The problem is that Bear Stearns and other financials face a great unwind of leverage,' he said.

       
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