Earnings at Bear, Goldman Suffer Due to Subprime Mess

[EV_Ares]

Staff Reporters of THE WALL STREET JOURNAL

Bear Stearns Cos. on Thursday posted a 33% drop in earnings for its fiscal second quarter, as continuing turmoil in the market for risky mortgages crimped revenue in the investment bank's fixed-income division. Rival Goldman Sachs Group Inc. was also hurt by the subprime mortgage woes, posting a 1% decline in revenue.

Bear Stearns, a leading Wall Street underwriter of mortgage bonds, said net income fell to $361.7 million, or $2.52 a share, for the period ended May 31, compared with $539.3 million, or $3.72 a share, a year earlier.

The latest results included a noncash charge of $227 million, or 88 cents a share, to write down the value of Bear Wagner Specialists, a New York Stock Exchange floor-trading firm. Bear Stearns announced the charge in mid-May when it acquired the remaining minority stake it didn't already own in Bear Wagner from Hunter Partners LLC.

----------------------------------------------------------------------------

Bear's Fund Is Facing Mortgage Losses
Bond Sale Set for Today in Attempt to Raise Cash;
Woes Could Be Another Sobering Sign for Market
By KATE KELLY and SERENA NG

A hedge fund managed by Bear Stearns Cos. is scrambling to sell large amounts of mortgage securities, a setback for a Wall Street firm known for its savvy debt-market trading. The fund makes bets on bonds backed by mortgages, many of which are subprime, meaning they go to especially risky borrowers.

Faced with losses on its investments, the fund, called High-Grade Structured Credit Strategies Enhanced Leverage Fund, together with a sister fund, is trying to sell about $4 billion in mortgage-backed bonds to raise cash, according to people close to the fund and traders who have been solicited to buy the bonds.

The sales represent a sliver of the $7 trillion residential-mortgage-backed bond market, but it is still a large amount to be sold at one time and a potentially troubling sign for the broader mortgage-backed bond market.

(Snips from WSJ; Subscription only:

[PassingFair]

1. Pay no attention to the fetid, stinking mess behind the curtain.

Nothing to see there.

Move along.

Record highs and what-not.

Keep investing.

401K-401K-401K!

[Tandalayo_Scheisskopf]

2. The other name for this market...

The one they so studiously avoid: Derivatives. Same place that Enron messed up.

They were warned, but who really can warn The Smartest Guys in Any Room?

[PassingFair]

3. The other, other name.....

(tm) Just released today!

Forget "new paradigm"

Drum roll please....

"NEW MARKET MATRIX"

We have a NEW MARKET MATRIX!