"Banks....really aided and abetted this [subprime] industry collapse,"

March 13, 2007 -- Bear Stearns is being blasted by a leading independent research shop that says the Wall Street titan's robust purchase of subprime mortgages has helped fuel the sector's meltdown.

Describing the firm's buying activity as an example of "the fee foxes guarding the mortgage hen house, " CreditSights, an independent firm specializing in corporate cash flow and balance sheet analysis, slammed Bear for having subprime loans that have experienced extensive payment troubles and defaults, and "stood out in terms of weaker performance."

Bear, like a number of Wall Street firms and some mortgage lenders themselves, buys loans in order to package them as collateral for debt securities sold to investors.

CreditSights' analysis was based on reviewing mortgage performance at lenders like Countrywide, Washington Mutual and GMAC's ResCap unit, as well as Bear.

In the subprime category, Bear had the highest percentage of borrowers who were more than 90 days' delinquent, at an eye-popping 4.57 percent, according to CreditSights' analysis. That compares with ResCap's rate of 0.92 percent, Countrywide's 1.42 percent and Washington Mutual's 1.48 percent.

"Bear, and a lot of other dealers - including Lehman Brothers and Morgan Stanley - really aided and abetted this [subprime] industry collapse," said David Hendler, the lead CreditSights analyst on the study. "They did nothing to ensure that the loans they were buying were kosher. There was no 'good guy' here, no voice of reason or advocate for conservative standards."

The controversial research has prompted many tongues to wag on Wall Street as bond trading floors, flush with four years' worth of mortgage bond trading profit, begin to worry about the subprime contagion cutting into their bonuses.

Over the past two weeks, two major subprime issuers, Fremont General and New Century Financial, have ceased issuing these loans, with New Century being seen as on the brink of failure. The pair represent around 14 percent of the subprime bond market.

Bear has long been a dominant player in trading debt securities backed by residential and commercial mortgages, and over the past few years has made an aggressive push into bonds backed by subprime loans. According to Inside Mortgage Finance, the firm is ranked 12th in selling subprime-backed paper, behind Merrill Lynch, Lehman Brothers and Morgan Stanley.

The CreditSights research has Bear's bond executives furious.

One senior mortgage executive told The Post that CreditSights sampled pools that were "scratch and dent" pools - in other words, groups of loans that were obviously in trouble to begin with. Also, he argued that pinning these troubled loans on Bear was wrong, since they bought them in the market and didn't originate them in the first place.

"I'd put the [loan] health and quality of what we sell and trade up against anyone else. CreditSights just got it wrong, period," said the Bear mortgage executive.

roddy.boyd@nypost.com