Bear Stearns has blocked withdrawals from a mortgage investment fund amid Wall Street jitters over the crisis in high-risk subprime mortgages, the Wall Street Journal reports. Two Bear Stearns hedge funds heavily invested in subprime mortgages collapsed in June, and now another fund, which has only a tiny fraction of its assets in subprimes, is taking a beating.
The Asset-Backed Securities Fund is not threatened, insisted a Bear Stearns spokesman. "The fund is well positioned to wait out the market uncertainty," he said. The suspension of withdrawals came as a warning from American Home Mortgage that pressure to repay creditors may force liquidation ignited a sell-off. Its shares plummeted 89%.