Bear Stearns for Sale?

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They auction off foreclosed homes, so why not investment banks burned by foreclosed homes? CNBC’s Charlie Gasparino reports that if Bear Stearns stock falls much lower, and the losses from those subprime-burned hedge funds keep mounting, the bank could become a takeover target.

The Bear Stearns train wreck could make for compelling viewing in the days ahead, but we are convinced the Bear disaster is a bit of a sideshow now, and the story has moved on to larger questions: how many other investment vehicles that bet the wrong way on subprime mortgage are at risk of exploding? And what is the ultimate damage -- to the availability of credit, to the mortgage business, and the housing market -- if they do explode? We found two excellent stories on this, both a bit long but worth the effort:

Bloomberg’s Mark Pittman reports that the big bond-rating agencies -- Moody’s and Standard & Poor’s -- ‘are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans.’

This is not a shoe waiting to drop -- it is a boot the size of Italy. Pittman: ‘Losses may rival the savings and loan crisis of the 1980s and 1990s.’

And at MSN Money, columnist Jim Jubak explains what could be a fatal flaw in the structure of collateralized debt obligations (CDOs). He also names names of investors in the riskiest slices of debt. Named: the California Public Employees’ Retirement System, which invested $140 million.

FYI, we found both of those reports through Patrick.net. Thanks, Patrick.

Photo Credit: Reuters