Moody's cuts Bear

Moody's Investors Service said it downgraded the long-term ratings of the Bear Stearns Cos. Inc. to A2 from A1 and affirmed the Prime-1 rating on the company's short-term debt. This concludes the review that began on Nov. 14.

The outlook is stable.

According to Moody's, the downgrade reflects Bear's weak performance in 2007, the agency's view that the company's risk appetite has increased, as well as a more challenging core operating outlook in 2008.

As a result of sizable writedowns on its mortgage and collateralized debt obligation portfolios, Bear reported a fourth quarter pretax loss of $1.4 billion, the agency said. "These writedowns overwhelmed the earnings power of Bear's otherwise strong, but less well-diversified franchise," Blaine Frantz, a Moody's senior vice president, said in a written statement.

Supporting the stable outlook, the company continues to have a strong and increasingly global franchise that has historically produced solid and stable earnings, Moody's said. Bear's ratings also benefit from its ample capital position and strong liquidity profile, the agency noted.

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