Reuters reports that the bargain sale of The Bear Stearns Companies (NYSE: BSC) is making global bankers question the solvency of their "counterparties" -- whichever bank, hedge fund, or other financial institution is on the other end of the phone line seeking to borrow money or conduct a trade.

Like the alphabet soup I've learned over the last year -- Structured Investment Vehicles (SIVs), Collateralized Debt Obligations (CDOs), etc. -- counterparties is a concept I think we'll be hearing more about in the coming weeks. The basic point here is that financial markets run on trust -- after all, the word credit is derived from the Latin word credere, to believe. And when trust evaporates, the financial markets freeze up.

Reuters quotes BNP Paribas strategist Edmund Shing who said, "There's turmoil in all markets after Bear Stearns. Everyone's asking: Who's next? Is there a Bear Stearns in Europe? Could investment banks start to fail?" And trading volume is way down as a result: major players on the interbank market had been doing as little as 700 million pounds a day of business over the past week, a fraction of the several billions that would have been executed a year ago, and far less on Monday.