I have friends who work at Bear Stearns (NYSE: BSC) and one of them in a very senior capacity. Believe me, they are not laughing and this is actually quite a sad moment for them and their colleagues. Bear Stearns had an 85-year history having come through the Great Depression and several recessions. Bear was a proud trading house and took great pride in its trading prowess. Sure, the naysayers will argue that Bear bit off more than it could chew and that Bear was a greedy Wall Street firm. But there is more to the story and it should be told.

Bear Stearns was the second-largest packager of mortgage backed securities only surpassed by Lehman Brothers (NYSE: LEH). As we saw these past couple of years, the quality scale on mortgage-backed securities slid down to lousy, risky sub-prime mortgages. But keep in mind that the $400 billion worth of securities that Bear Stearns underwrote and managed were not all lousy credit risks. The biggest part, more than $300 billion worth were of the highest quality. Bear Stearns facilitated a market that needed facilitating!

In the old days, only major banks underwrote mortgages and they typically kept and serviced the loans. But as the American population and economy expanded these past 20 years, mortgage companies were formed and needed to "sell the loans off" as they did not possess the capital base of say a Bank of America (NYSE: BAC) or a Wells Fargo (NYSE: WFC). Firms like Bear Stearns became adept at packaging these loans and re-selling them to major pension funds and hedge funds globally.

The problem ensued when credit requirements and quality went to lower levels -- sub-prime. Borrowers were scrambling to get in on the real estate ladder as homeowners bought the song and dance that home values were poised to run up 25%+ per year. Don't worry about the mortgage payment -- in fact here is a teaser rate to get you going.

Bear Stearns will provide the pundits with a lot of stories as we all begin to question what happened? And what happened in just 2 short days. JP Morgan (NYSE: JPM) has picked off for an absolute song 85 years worth of expertise and relationships in many profitable investment banking businesses -- except mortgage underwriting and packaging. To think JP Morgan is paying for Bear Stearns what Bear Stearns use to make in one month's profit.

Georges Yared writes about great growth stocks today in Game On Investing