At the Expense of Lives: Kyle Bass and Gambling with the Market

As the founder of Hayman Capital Management and known regular on morning financial talk shows, it’s difficult to find anyone who pays attention to the markets and doesn’t know who Kyle Bass is. Though pundits, former traders and hosts seem to sing his praises when he attempts to demystify the markets and unseen trends, his abilities as a financial soothsayer haven’t been as accurate as they were just before the 2008 subprime mortgage crisis. But for a man who seemed to know what was going on in the financial world, just how did he lose so much credibility?

The start of Bass’ decline was fairly recent, starting with General Motors and the invasive probes they were subjected to following a series of serious injuries and deaths in connection with their vehicles. Without hesitation, speaking with anyone or thing that would listen, Bass was at the ready to defend General Motors and their business as one of integrity and beyond reproach. Of the many tools at his disposal, a favorite was to blame the calamitous crashes on the motorists themselves, often citing intoxication and recklessness as the cause. It didn’t take long for the news media and the federal probes to reveal that General Motors was aware well before distribution of their vehicles that they had shipped with faulty power steering and airbags, making them dangerous to operate and placing the manufacturer at fault for the resulting damages. What was also revealed was Bass’ financial involvement with General Motors, making his defenses of the company to be called into question.

Saying outlandish things in order to protect an investment is not beyond the pale for those in investing, even if they are, at best, ethically dubious in practice. But Bass’ actual business practices is what ruined his claims to market savvy.

Having attracted the interest of the House of Representatives, Bass has drawn attention to a massive market loophole he exploited for profit. Along with Erich Spangenberg, a known patent troll, Bass created the Coalition for Affordable Drugs. Through this front, Bass would short-sell stocks belonging to pharmaceutical firms, then challenge them. Though not necessarily illegal, the result was the companies that were challenged would have to raise the prices of their drugs in order to continue operations, limiting the available funds for medical research and placing lives at risk. The only beneficiaries of this exchange were Bass and Spagenberg who’d made a small fortune.

His ambition may have got the better of him, as the emerging pattern is what drew the attention of the federal government. But it was public attention that concerned Bass the most. When challenged on these practices, Bass at first defended his company, saying that such activity promoted competitive pricing in the market to lower the cost of drugs. This was refuted by experts, and the resulting pressure forced Bass to admit they were correct and profit was his sole motive.