Business

‘STEARN’ RESPONSE TO TIMES ARTICLE

Bear Stearns is claiming that one of its analysts was done wrong in a scathing New York Times analysis of the collapsing subprime mortgage industry.

Bear analyst Scott Coren was described as having written “an upbeat report” about a collapsing subprime mortgage lender, New Century Financial, a company considered to be just days away from bankruptcy.

The article, written by Pulitzer prize-winning columnist Gretchen Morgenson, chronicled in a Page One article how Wall Street willingly created a burgeoning market for bonds-backed loans that were virtually certain to have trouble making their principal and interest payments. Coren, who upgraded his call on New Century on March 1, appeared to be portrayed in a conflict of interest to rival that of the notorious Internet bubble era.

But, in fact, Coren had made a series of gutsy calls on the subprime mortgage sector – no mean feat at Bear Stearns, a firm that in recent years has earned hundreds of millions of dollars annually from mortgage trading.

He put out a “sell”- called an “underperform” at Bear – when New Century stock was at $38 and maintained it until it slumped to $15.

Even Coren’s upgrade on March 1, when New Century was clearly beginning to collapse, advised investors to “stay on the sideline.”

Nor was Coren the only analyst to recommend the purchase of New Century stock.

UBS, a major player in the mortgage bond market, raised its rating on the stock to “neutral” on Feb. 23, while Stifel Financial upgraded to “hold” Feb. 13.

A Bear spokeswoman said, “The characterization of Scott’s research was a complete misrepresentation.”

Still, one rival mortgage analyst, a managing director and 25-year research veteran, told The Post that unless New Century officials were reassuring Bear Stearns – with whom it has a financing relationship – “there was no good reason to upgrade them.

“And if management lied to Bear, it would be smart to tell everyone they did, because [the firm is] looking silly now,” the vet said.