When the subprime market became shaky in February, Gyan Sinha, a Bear Stearns analyst, held a conference call of 900 investors, telling them they had little need to worry. However, that was not the case, according to The Wall Street Journal Asia.

Last week, amid warnings from Standard & Poor’s and Moody’s that hundreds of bonds backed by mortgage loans could be downgraded soon, the index that tracks securities made up of subprime loans, hit the worst level to date.

Sinha, 43, has been one of the most respected mortgage analysts on Wall Street for years. Now, after the conference call and two Bear Stearns hedge funds being bailed out by the company, he is getting criticized.

“It’s time to buy the index,” he told clients on a Feb. 12 call, according to a participant. Based on Bear’s models, “the market has overreacted,” one participant quoted Sinha as saying. 

In a written statement, Sinha defended his call, stating the point was to give investors a frank sense of the underlying value of the mortgage securities the index tracked. He added that his research wasn’t intended as “a prediction of where the index would trade in the future based on technical or other market forces.” He said Bear didn’t pressure him to be bullish.

Sinha’s view of the market has gotten extra attention due to Bear being a large player in the organization and securitization of mortgages, as well as the trading of mortgage-backed securities and related products.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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