Broken from Bear Stearns cause unnecessary panic in financial markets. The story of Bear Stearns and their refusal to heed the old adage of all your eggs in one basket should be a lesson here.
Bear story itself is impressive. The company has survived two world wars, the Great Depression, and every recession and the market since the accident. So why is this prestigious investment bank is not? We have to look like a bear made a business.
Collateral Mortgage Obligations (CMOS) are on the first page of each financial newspapers almost every day. CMOS are bonds, which with the support of people like you and I are paying their mortgage every month.
These bonds, which once regarded as a safe investment, since most people pay their mortgage bill before they pay nothing. Well, it was a bear in the core business. While other Wall Street firms have diversified their fixed-income trading desks, Bear Stearns not. And when people stopped paying their mortgage, the game was work.
Will other firms, which face the same consequences as a bear? Probably not. Some large firms with fixed-income desks may have a large write downs of 2 and 3 quarters of this year, but most of these companies have diversified their operational units during the year. Wealth management, equity trading and research, asset


management and prime brokerage services round of the Wall Street firms.
In the Federal Reserve assistance, JP Morgan Chase, perhaps eventually buy Bear Stearns (assuming
their board of directors approved it). This is a good signal to U.S. investors that the Fed will have to dig deep into their bag of tools to help the U.S. economy survive the real estate bust.