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���������ֳ�-New York-14 November 2007: ���������ֳ� affirms the long-term credit ratings of The Bear Stearns Companies Inc. (Bear Stearns) and its subsidiaries and downgrades the short-term rating to 'F1' from 'F1+', and Individual rating to 'B/C' from 'B'. Total long-term debt of $62.1 billion was outstanding as of Aug. 31, 2007. Short-term unsecured debt was $13 billion. The Rating Outlook has been revised to Negative from Stable. A complete list of ratings is at the end of this release.

The long-term ratings acknowledge Bear Stearns' solid franchises in global clearing and prime brokerage, and its more limited market and credit risk appetites relative to peers. ���������ֳ� believes Bear Stearns managed its own balance sheet well through the ongoing credit stressed environment. However, its financial performance has been negatively impacted by management's decision to support a sponsored structured credit fund.

The Negative Outlook weighs a number of factors including deteriorating housing metrics, credit risk re-pricing, widespread illiquidity, and diminished investment banking opportunities. The company's susceptibility to these stresses is evident in consolidated year-to-date (YTD) financial results.

Near term profitability is expected to be pressured given Bear Stearns' franchise exposure to the total U.S. mortgage market. While its Global Clearing Services and Equities businesses are performing well, ���������ֳ� believes financial performance in 2008 will remain challenging given Bear Stearns' scale of its fixed income business and more limited international scope. Liquidity has been managed well and remains adequate, however, the operating environment and continuing decline in credit investor appetites may limit Bear Stearns' financial flexibility.

Future adverse rating actions will be dictated by several factors, including: continued interim earnings declines, severe negative valuation adjustments, an increased risk profile, diminished liquidity, rising leverage and/or tangible equity erosion.

���������ֳ� believes resumption of sustained earnings growth will be hampered by limited opportunities in key business lines (mortgage origination, securitization and CDO/CLO underwriting). Increased diversity within its fixed income franchise beyond mortgages has been sought via credit products and derivatives. And although these may be potential sources of incremental revenue growth, these products are also susceptible to many of the obstacles in the mortgage market. Prospects for near-term growth in asset management revenues and AUM have been dampened by the liquidation of two sponsored MBS hedge funds this past summer.

Results for nine months 2007 were down versus the 2006 period as net revenues declined by -7.2% and pre-tax income dropped -30.6%. In third quarter 2007 (3Q07), the company reported pre-tax income of $174.8 million for the quarter, after net inventory markdowns of $700 million and $200 million in losses related to the failure of the two High-Grade Funds. Based on subsequent valuations, management has indicated that additional net writedowns totaling $1.2 billion will be taken 4Q07.

Bear Stearns continues to maintain cash and unencumbered securities in excess of 110% of unsecured debt maturing in one year. Like its U.S. peers, leverage has increased steadily over the past three years. Term debt maturities have been extended, however, and are fairly well-laddered.

Management intends to repurchase up to $500 million of common shares over the Sept. 1, 2007 - Dec. 31, 2007 period. ���������ֳ� expects corporate share buybacks to occur in tandem with earnings and capital generation, so that leverage is contained and the capital structure is unimpaired.


Ratings downgraded; Outlook Negative

The Bear Stearns Companies Inc.
--Short-term Issuer Default Rating (IDR) to 'F1'from 'F1+';
--Short-term debt to 'F1' from 'F1+';
--Individual to 'B/C' from 'B'.

Bear Stearns Securities Corp.
--Short-term IDR to 'F1' from'F1+'.

Custodial Trust Company
--Short-term debt to 'F1' from 'F1+';
--Individual to 'B/C from 'B'.

Ratings affirmed; Outlook Negative

The Bear Stearns Companies Inc.
--Long-term IDR at 'A+';
--Senior debt at 'A+';
--Subordinated and preferred at 'A';
--Support at '5'
--Support Floor 'NF'.

Bear Stearns Securities Corp.
--Long-term IDR at 'A+'.

Custodial Trust Company
--Short-term deposits at 'F1+';
--Long-term deposits at 'AA-';
--Long-term IDR at 'A+';
--Support at '1'.

Bear Stearns Capital Trust III
--Trust preferred at 'A'.

The Rating Outlook is Negative for all ratings.

Contact: Leslie Bright +1-212-908-0622, New York; or Eileen Fahey +1-312-368-5468, Chicago.


Media Relations: Kenneth Reed, New York, Tel: +1 212-908-0540.