The Bear Stearns-subprime mortgage-hedge fund-CDO imbroglio continues apace. While there are questions of systemic risk involved, it raises a whole host of other questions, including:  If the Bear Stearns-managed funds are losing, who is winning? A trio of posts by blog notables delve into the subject.

Felix Salmon at Market Movers cites an article that speculates on the exposure of the prime brokers to the Bear funds. Salmon notes that prime brokers are, by and large, immune from the ills of their clients. This time may very well be different.

Justin Fox at the Curious Capitalist on a report that many Wall Street firms were actively hedging their subprime mortgage exposure earlier in the year. Which begs the question: Who is on the other side of the trade? Are there more fund blow-ups on the horizon?

Going Private provides some color on the supposed JP Morgan & Merrill Lynch auctions of the Bear Stearns funds’ collateral. The problem arises is that we really don’t know at what price transactions took place (or not).

All of these posts point to a larger question: What are these securities really worth? In a placid market valuing a security is relatively straightforward. However, in a period of market stress and chastened dealers, who will be willing to step up to the plate? If a fire sale truly does occur, then an industry-wide re-pricing will ripple through portfolios and balance sheets across Wall Street. Something no one should really look forward to.

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