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.

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  4. Can private investors benefit from collateralized debt obligations (CDO)?

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