Bear Stearns approaches junk bond status

Investment bank Bear Stearns isn’t just running out of liquid capital, it’s running out of reputation.

Meanwhile, Bear Stearns’ bond rating has been cut three levels, to BBB, by Standard & Poor’s. That’s only two grades above junk status.

But, S&P said it could downgrade Bear Stearns even further.

S&P plans to complete a review of Bear Stearns in the next few weeks “as more concrete, longer term solutions to Bear's liquidity and confidence crisis are fleshed out,” S&P analyst Diane Hinton said.

“The ratings could be lowered further if there is a failure to stabilize liquidity or to achieve a satisfactory longer term funding structure,” Hinton said.

Bear Stearns can’t get capital regardless of its rating, Allegiant's Harding said.

“What their rating is now is irrelevant,” he said. “Whether it's BB, AAA or A, I just think it's a response to the emergency funding today.”