When Bear Stearns reported earnings on March 15th, 2007, they calmed the markets about the subprime crisis and Wall Street’s risk associated with troubled mortgages. When I wrote Vaporizing Subprime on that day, the S&P was just beginning a rally to reverse the late-February selloff. In my opinion, the assurances from Bear Stearns, Goldman and Lehman that subprime would not pose a significant or continuing threat to their business or the markets in general was a primary cause for stemming the slide and pushing us higher. So when I hear the problems with two Bear Stearns hedge funds that are focused on subprime mortgage exposure, it’s a bit troubling. I’ve just read through a bunch of the news coverage from March 15th and comments like this from back then are not impressive now - “Bear’s CFO, Sam Molinaro, said on the conference call that Bear’s overall exposure to subprime is minimal and so the current troubles pose little direct threat to the company.” Contrast comments like you’ll read here to what is being said today and you should be left with an unsettling thought. Either Bear was wrong about their optimism back then or subprime is getting much worse than anyone wants to admit.