Outlook Bearish for Bear Sterns Hedge Funds

Two major Bear Stearns hedge funds that once controlled more than $20 billion in assets are on the brink of collapse after disastrous losses in securities backed by subprimes. The Journal reports a bailout plan that would have kept the funds afloat fractured last night, and the consequences could ripple through the mortgage market in the weeks ahead.

Bear Sterns has tried to raise extra capital to ward off total liquidation, and some creditors have been supportive: Goldman Sachs and Bank of America tried to unravel their complex loan deals without dumping holdings and sending a chill through the market. Merrill Lynch, however, is reportedly planning to seize $850 million in assets from the funds.   (More subprime mortgages stories.)