SEC studies Bear Stearns hedge fund problems

WASHINGTON — The Securities and Exchange Commission is examining the near-collapse of two Bear Stearns hedge funds that made bad bets on the mortgage market.

The SEC inquiry is “informal” at this point and has not resulted in any subpoenas or formal document requests, a person familiar with the matter said Wednesday. This person spoke on condition of anonymity because the inquiry has not been publicly disclosed.

The existence of the probe was reported by BusinessWeek and CNBC on Monday.

SEC Chairman Christopher Cox disclosed at a House hearing on Tuesday that the agency has started roughly a dozen investigations related to complex aggregations of debt known as collateralized debt obligations, in which hedge funds have increasingly invested.

Cox declined Wednesday to confirm or deny the informal probe of Bear Stearns Cos.

The situation at Bear Stearns took on urgency last week with the near-collapse of two hedge funds that invested in mortgage securities.

Bear Stearns said Tuesday it would provide about $1.6 billion in secured financing to its Bear Stearns High-Grade Structured Credit Fund after the fund sold some assets to partially mollify lenders. Bear Stearns said it is not providing any financing to the second fund.

Banc of America Securities said in a report last week that the troubles could signal the “tipping point of a broader fallout from subprime mortgage deterioration” that could lead to higher rates for new home loans.