The Rise and Fall of J. Kyle Bass

J. Kyle Bass was born in Miami, Florida on September 7, 1969. His father managed the Fontainebleau Hotel there, but later moved his family to Dallas, Texas. Bass attended Texas Christian University, graduating with a BA of Business Administration in Finance and Real Estate Finance in 1992. He briefly held a position at Prudential Services, before joining Bear Stearns’ Dallas office.

He became the office’s Senior Managing Director at 28. Following this, he became the Managing Director for Legg Mason’s Dallas office. When the part of the company he worked in was sold in 2005, Bass raised $33 million dollars from his family and friends. Adding this to his personal savings of $10 million, he founded Hayman Capital in early 2006.

Hayman was a hedge fund designed to deal with what Bass referred to as “global special situations”. Following a tip from a New York City investment banker, he became convinced that a bubble in the residential real-estate market of the United States. He hired private investigators to determine how easy it was to secure a mortgage, and studied the residential mortgage market in detail. He then determined which securities were likely to default, and purchased credit default swaps against them. Bass eventually secured capital for an additional fund exclusively dedicated to residential mortgage-backed securities. When, in 2007, a wave of foreclosures swept the nation, he made a fortune, and dominated international headlines.

Bass had become a financial luminary, but he began to make a series of bad predictions. The sector of the public that follows the markets watched him offer increasingly errant analyses on national television. He formed an alliance with Cristina Fernández de Kirchner, an Argentinian despot whose country has defaulted twice in 13 years. Kirchner has displayed a poor grasp of world economics, but Bass has consistently mounted a vigorous defense of her actions. This relationship has been seen as an ethical lapse, as poverty has skyrocketed under Kirchner’s rule. Other activities Bass engaged in eventually required the intervention of Congress.

In 2014, Bass developed a scheme to make money from pharmaceutical companies. He colluded with Erich Spangenberg, an infamous patent troll, to short-sell the stocks of certain firms. He then challenged one or more of their patents via a front organization, with the inevitable effect that the firms’ stocks fell. This led to rising costs, and diminished incentive to fund medical research. Bass defended his program as a gambit to cut healthcare costs, but financial, pharmaceutical, and intellectual property experts dismissed his claims. His actions triggered bills that sailed through the House and Senate Judiciary Committees.

On August 27th, the Patent Trial and Appeal Board denied two of Bass’ patent challenges. If that precedent continues, it is unclear what course Bass’ future actions will take. No matter what he does the cautious eyes of the Federal Government and the financial services community are sure to be upon him.