Potential cascading effect of BSC's collapse

The fate of Bear Stearns could matter greatly to the many governments, hedge funds, pension funds and other investors who entered into derivatives contracts with the brokerage firm. Some of the investors engaged in these swaps with Bear are better positioned than others. Bear created two subsidiary companies, known as special-purpose vehicles, with a separate legal status intended to make their obligations secure even if the parent company goes bankrupt. These SPVs are triple-A-rated, and their management would be assumed by another brokerage firm if Bear collapsed. But many other investors entered into swaps with a direct subsidiary of Bear that would be more acutely exposed to the firm's future.