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Hiding Insolvency

  • Maybe the reason Bear Stearns held its mortgage securities through the second half of 2007 into 2008 was that Bear Stearns had "marked" its portfolio way too high.

  • If Bear Stearns sold mortgage securities to bolster its cash position, it would be "establishing" a new price.

Maybe Bear Stearns knew that the new price (the sale price of any mortgage securities) would be far lower than Bear's marks.  Maybe Bear Stearns was insolvent for a long time before March of 2008. 

Makes me wonder...

'Disclosure: NO Positions'