Reader Dan on Bear Stearns

Reader Dan sends comments on Bear Stearns…

The Wall Street Journal reported:

The two funds suffered double-digit losses through April after making bad bets on securities backed by subprime loans, according to Reuters. The subprime market, which gives home loans to borrowers with weak credit, has been roiled by rising defaults.

Bear Stearns has also been negotiating with JPMorgan Chase, Merrill Lynch, Citigroup and other creditors in an attempt to restructure the hedge funds. Other big lenders include Goldman Sachs (Charts, Fortune 500) and Bank of America (Charts, Fortune 500)…

MARKET WATCH indicates:

Losses suffered by the Bear Stearns fund weren’t surprising because the investment bank has aggressively expanded in all parts of the mortgage market, he added.

“Bear has been among the most aggressive players in every aspect of this market – from origination to servicing mortgages and through to the trading of these securities,” he explained.

Bear Stearns didn’t invest much of its own capital in the fund and its exposure is relatively small, so the problems shouldn’t have any material impact on future results, Sam Molinaro, chief financial officer of Bear Stearns, said according to a transcript of a Thursday conference call.

Not such a bad deal for Bear Stearns COS, having only two sequestered funds in trouble. It is important to follow gainers and losers with any economic model, flawed or not. Bear Stearns was always well protected. Will keep you posted.


This one was by Reader Dan