Pricing at heart of Bear Stearns arrests

NEW YORK, June 20 (UPI) -- Two former Bear Stearns fund managers charged with fraud face a tricky task of putting a price on complicated assets, investment analysts said Friday.

Coming up with the correct value for hedge funds based on risky, subprime mortgages is half-science, half-art and "a humongous problem for Wall Street," attorney Michael Young told The New York Times.

"These days these valuation obstacles are at the core of the write-downs," said Young, an attorney at Willkie Farr & Gallagher.

Stearns' manager Ralph Cioffi and colleague Matthew Tannin were arrested on nine counts of securities, mail and wire fraud Thursday after allegedly telling customers in April they were comfortable with assets that imploded, losing $1.6 billion.

Bankers at Credit Suisse, Merrill Lynch and Morgan Stanley have also found employees who mismanaged estimates of various funds, the Times reported.

Credit Suisse fired several employees who overvalued mortgage assets by $2.65 billion. Merrill Lynch said it lost $18 million on similar circumstances in May. And on Wednesday, Morgan Stanley said a rogue trader had cost the bank $120 million this year, the Times reported.