This is the biggest news of the day: Bear Stearns (bsc), the second-largest underwriter of US mortgage bonds, is in big trouble and has approached the Fed. After denying for three days that access to capital was at risk, Bear Stearns said today that its cash position had “significantly deteriorated”. The New York Fed has stepped in to provide financing through JPMorgan for up to 28 days, the bank said in a statement today. It is an unexpected turn of events for Bear Stearns: Its CEO said earlier this week that the company’s “liquidity cushion” was enough to weather the credit-market crunch. The WSJ online reports rating agencies are meeting on Bear Sterns news, and a possible downgrade could come as early as today. Bear Stearns stocks are down by a record 53%.

Lehman Brothers (leh), the largest underwriter of mortgage bonds, tumbled 11%. Citigroup (c), JPMorgan (jpm) and Bank of America (bac), the three largest banks in the US, each fell more than 3%.

Moody’s has downgraded Washington Mutual (wm) to Baa3 from Baa2. The outlook is negative. Moody’s cited the deteriorating housing market and the resulting increase in “expected provisioning needs on Wamu’s residential mortgage loan portfolio”.

Posted in Categories: Stocks.

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