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Thursday 11th of February 2010
December 21, 2007    

Bear Stearns posts first loss in 84 years

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by Kay Murchie

Bear Stearns, the US investment bank, has reported a quarterly loss of $854 million, its first in the company’s 84-year history, as bets on risky sub-prime mortgages in the US went bad.

Sub-prime lenders target people with poor or non-existent credit histories. Rising interest rates in the US resulted in a rise in the number of mortgage defaults, with the sub-prime sector especially affected.

The bank said it had written down $1.9 billion worth of sub-prime mortgage-related write-downs, it originally suggested it would write down $1.2 billion.

James Cayne, chairman and chief executive at Bear Stearns, said we are obviously upset with our 2007 results particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses.

As a result of the losses, Mr Cayne and other senior executives have waived their bonuses.

A series of global banks have announced losses due to their exposure to the US sub-prime mortgage market. Losses announced so far have reached approximately $80 billion but the final total might be higher.

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