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While I believe Bear (NYSE:BSC) has lots of troubles, I am not ready to declare them a zero.

Follow this course of events:

First, Lehman Bros (LEH) was reported to be cutting 5% of their staff.

Then, Briefing.com posted the following downgrades: Moody's downgrades 163 tranches from 15 transactions issued by Bear Stearns ALT-A Trust; 155 tranches placed on review (68.13 -1.95) The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels.

Then, with Bear Stearns trading down over $7, a CNBC commentator was going to "discuss weakness in financials, saying speculation surrounds BSC ($62.35 -7.59). Says one rumor is that BSC tried to shop their clearing operations a few weeks ago, which was a sign how badly they need cash, but they couldn't find a buyer.

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I normally don't pass along hedgie rumors, but this one strikes me as unusually pernicious, and since it's already on CNBC. . .

UPDATE 2: March 10, 2008 12:59pm

[theflyonthewall] Bear Stearns-BSC says there is 'no truth to liquidity rumors'-Bloomberg
Blomberg cites a company spokesman.

UPDATE: March 10, 2008 12:50pm

Marketbeat reports the option activity in BSC, in Bearish Bets on Bear Stearns:

Options activity is heavily tilted toward bearish bets, with aggressive players buying put options on March options contracts at the $50 and $40 strike prices – which would be an enormous move in the shares, currently trading at about $62.50 a share. Officials at Bear Stearns were unavailable for comment.

However, “it’s very expensive to buy a put” at a $60 strike price, notes Sveinn Palsson, options analyst at Credit Suisse. “You’re paying $4 for a $60 stock, and there’s not much more than a week left in the maturity, so people are just trying to get that cheaper in sort of a worst-case-scenario thing.”

March options expire at the end of next week, so these are short-term bets, but heavy activity is being witnessed in April options as well. Volatility has spiked dramatically in the options as the bearish bets have multiplied; more than 31,000 March put options have traded today, compared with about 16,000 call options. Meanwhile, spreads on the company’s credit default swaps have widened dramatically, to between 700 and 800 basis points, compared with about 450 points Friday.

Thanks, David!

Source: Rumor of the Day: Bear Goes Belly Up