Bear Stearns Joins...

...the list of firms facing potential legal trouble out of the subprime housing situation:

Now, thanks to WSJ colleague Kate Kelly, we’ve got details. She reports on a developing criminal investigation into the Bear hedge fund fallout. Citing people familiar with the matter, Kelly writes that on an April 25 conference call Bear fund manager Ralph Cioffi told participants he was “cautiously optimistic” about the bank’s ability to hedge its holdings of securities tied to subrime. Meanwhile, back in March, Cioffi moved $2 million of his own money out of one of the troubled Bear funds, Kelly’s sources say. Also, Cioffi allegedly continued to voice his concern to colleagues about the withering states of the credit markets and subprime securities, and wondered aloud whether they could ruin his funds.

During the April conference call, the story says, a participant wondered whether packaged mortgage securities in the fund — called collateralized debt obligations, or CDOs — were tied to subprime assets. Cioffi allegedly replied that he didn’t have time to teach “CDO 101.”

According to the WSJ, federal prosecutors in Brooklyn began a criminal probe last summer, and are now looking at whether the disparity between the alleged public and private comments could constitute fraud. Supboenas have not yet been issued, and Bear itself, according to the story, is unlikely to be indicted.