Bear Stearns

DEFINITION of 'Bear Stearns '

An investment bank located in New York City that collapsed during the subprime crisis in 2008. The collapse of Bear Stearns was the result of the company's exposure to collateralized debt obligations (CDOs) and other securitized debt markets, which it had become overleveraged in. The company was subsequently sold to JP Morgan Chase at a fraction of its previous market capitalization.

BREAKING DOWN 'Bear Stearns '

The illiquidity that Bear Stearns faced due to its exposure to securitized debt also exposed troubles at other investment banks. Many of the biggest banks were also heavily-exposed to this sort of investment. Financial portfolios heavy with toxic debt were one cause of the global financial crisis of 2008.

RELATED TERMS
  1. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default ...
  2. Collateralized Debt Obligation ...

    An investment-grade security backed by a pool of bonds, loans ...
  3. Lehman Brothers

    A firm that was once considered one of the major players in the ...
  4. Subprime Market

    The market for lenders and borrowers of subprime credit, a credit ...
  5. Subprime Mortgage

    A type of mortgage that is normally made out to borrowers with ...
  6. Asset-Backed Security - ABS

    A financial security backed by a loan, lease or receivables against ...
Related Articles
  1. Insurance

    CDOs And The Mortgage Market

    These structured products contribute to keeping borrowing rates low.
  2. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  3. Options & Futures

    These Financial Products Are Too Complex For The Average Joe

    Structured financial products are so elaborate that investors are unable to assess costs and risk.
  4. Active Trading Fundamentals

    The Fall Of The Market In The Fall Of 2008

    How did America's strong economy tumble so quickly? Find out here.
  5. Retirement

    Collateralized Debt Obligations: From Boon To Burden

    CDOs were to be Wall Street's boon - instead they went bust. Find out what went wrong.
  6. Mutual Funds & ETFs

    Who Is To Blame For The Subprime Crisis?

    From lenders to buyers to hedge funds, it appears everyone has blood on their hands.
  7. Mutual Funds & ETFs

    The 2007-08 Financial Crisis In Review

    If you don't know how the recession began, read on to learn more.
  8. Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

    These loans can spell disaster for borrowers, but that doesn't mean they should be condemned.
  9. Personal Finance

    How Will The Subprime Mess Impact You?

    The subprime collapse could mean doom and gloom for housing, equities and the overall economy.
  10. Personal Finance

    The Fuel That Fed The Subprime Meltdown

    Take a look at the factors that caused this market to flare up and burn out.
RELATED FAQS
  1. What are the reasons that cause investment bankers to fail in their careers?

    The main cause of investment bankers failing in their careers is underwriting assets without understanding their true values, ... Read Full Answer >>
  2. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  4. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center