The hole at Bear Stearns gets deeper

Bear Stearns (NYSE: BSC) probably hoped that it mortgage-backed securities problems were behind it when its bailed out two of its own hedge funds. But no such luck. The company has halted withdrawals from another fund that The Wall Street Journal says has another $850 million in mortgage instrument holdings.

Bear Stearns says it can work its way out of the mess. The investment bank stated that it is not prudent to sell the fund's holdings in this environment.

But, what does that mean. Probably that if the portfolio was sold off there would not be nearly enough money to pay out investors, and Bear Stearns would be stuck with the check.

Over the last six months shares of BSC are down well over 25%, and the market is concerned about whether there is more news that the company has yet to disclose about it mortgage security investments. Along with UBS and JP Morgan (NYSE: JPM), It has loaned American Home Mortgage (NYSE:AHM) money. And that mortgage company is in the midst of a collapse that could cause a liquidation this week.

Bear Stearns could be in worse shape than Wall St. knows now. Its shares could go lower... and lower.

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