Kyle Bass, the famed hedge fund manager, who successfully called the subprime crisis in 2008 before it nearly destroyed the U.S. financial system, is climbing a new wall of worry; Asia’s impact on the U.S.
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During an upcoming appearance on the FOX Business Network’s Wall Street Week, Bass, the founder of Hayman Capital Management, was asked whether the U.S. could be facing a recession.
“Asia has a giant credit bubble, that they've been building for the last 10 years, or longer, that has kind of reached its atrophy level and it's going to -- it's going to happen over the next two or three years,” said Bass while adding his odds for a recession, “So whether that causes the U.S. to have a brief, minor recession, I think it's kind of 40, 50% chance in the next year, personally.”
Wall Street Week airs on Friday at 8 pm ET.
Bass has a solid track record predicting financial blowups. He reportedly earned over $4 billion betting against subprime mortgages. He has also warned over other trouble spots such as Japan, which is currently dealing with negative interest rates implemented by the Bank of Japan, in efforts to shore up its economy.
As notable is the critical role he played leading up to the collapse of Bear Stearns as early as 2006. At the time he was running his own firm after leaving Bear Stearns and gave a presentation to high level execs about risks impacting the firm. A warning that was ignored. During his Wall Street Week appearance Bass confirmed he was in fact the source that began to raise questions internally at Bear Stearns about how leveraged the firm’s balance sheet was against bad mortgages.
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Ultimately, as those discussions leaked to a rival news network, the reputation of Bear Stearns suffered irreparable damage and eventually led to its demise before it was acquired, under duress, by JPMorgan CEO Jamie Dimon (JPM).
“They put themselves out of business,” said Bass. He then elaborated on what really went on behind the scenes, “Look, Bear leveraged their balance sheet 33 times with toxic mortgages. And whether it was Bobby Steinberg that ran risk management or Jimmy Cane, that ran the firm, they either were stupid or they took on those risks knowingly so and failed. One or the other.” he said.
The collapse of Bear Stearns sparked a contagion that later became known as the ‘Great Recession.’
Last month, as reported in the Wall Street Journal, the role Bass played during the final days of Bear Stearns, was disclosed in the Financial Crisis Inquiry Commission Records. His comments on the FOX Business Network are the first time he has confirmed the accuracy of those records.