Credit and liquidity concerns swirling around Bear Stearns ( BSC) sent the stock to new lows and pulled the financial sector down with it.

The brokerage house wobbled as early morning options trading saw heavy volume in puts being written at low prices. Bear Stearns was selling shares at $53.99, but had been as low as $50.48, a decline of 16%.

Additionally investors are becoming increasingly concerned about the company's mortgage holdings and its ability to finance them. Not only that, Bear is a creditor of private equity firm Carlyle Capital, which is expected to go out of business after it was unable to meet its margin calls. Carlyle announced late on Wednesday that it expected creditors to seize its remaining assets.

Also unable to meet its margin calls was Thornburg Mortgage ( TMA), which crumbled almost 20% at one point after receiving a default notice from Morgan Stanley ( MS).

Morgan had loaned Thornburg $49 million and the jumbo lender couldn't pay its $9 million margin call. The stock had started to make a slight recovery in value over the last few days, but that came to a crashing halt as shares slid 55 cents to $2.30.

Between Bear and Carlyle, the NYSE Financial Sector plunged over 4% in early morning trading, but was recovering throughout the afternoon. It was lately trading at 7,105.21, a drop of 20.88, while the SPDR Financial Sector ETF ( XLF) was off by 0.3% to trade at $24.69.

Also getting beat up was UCBH Holdings ( UCBH), the holding company for United Commercial Bank. Its shares fell 6% to $8.86 when the company said its accountant PriceWaterhouseCoopers decided not to work with them any longer. KPMG has been hired as a replacement.

Elsewhere CBRE Realty Finance ( CBF) reported a fourth-quarter adjusted loss of $11.9 million, or 39 cents a share, compared to last year's profit for the same period of 19 cents a share. Not only that, the Hartford, Conn.-based commercial real estate specialty finance company announced that it hired Goldman Sachs ( GS) as its financial adviser to assist with its strategic and operational initiatives. CBRE traded down 6.9% to $3.90.

On a positive note, Fox-Pitt Kelton upgraded Freddie Mac ( FRE) to in line from underperform, and said the second-largest U.S. home funding company had significantly reduced its mark-to-market earnings volatility and that its capital appeared sound.

Freddie was enjoying a day of trading in the green, with shares selling at $20.96, a gain of 5.7%. Fellow lender Fannie Mae ( FNM) was climbing 9.8% to $23.12.

Finally, a Keefe Bruyette & Woods analyst increased her first-quarter earnings estimates for stock exchange operators based on strong trading volume. CME Group ( CME) traded up $9.59 to $507.99, Nasdaq ( NDAQ) climbed $1.73 to $40.46 and NYSE Euronext ( NYX) ticked up 98 cents to $61.20.

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