The foundations are crumbling

If a deal for Bear Stearns doesn't come down tomorrow, the company may be kaput:

Department heads at Bear Stearns met with officials at J.C. Flowers and JPMorgan Chase Saturday afternoon to give an overview of their business divisions, including headcount and profit and loss positions, CNBC has learned.

The discussions indicate that potential bidders for Bear have been narrowed to those two firms, although other last minute contenders could still weigh in, according to one source aware of the talks.

While Bear would certainly like more bidders, time has become a major issue for the investment bank.

On Friday Bear Stearns, the fifth largest U.S. investment bank, said a cash crunch forced it to turn to the Federal Reserve and JPMorgan for emergency funds, intensifying fears of a widening global credit crisis and driving its shares down as much as 50 percent. It also stepped up efforts to find a buyer.

On the same day S&P lowered its long-term counterparty credit rating on Bear to "BBB" from "A," and it placed long-and short term ratings on credit watch with negative implications.

Because of that S&P downgrade, bankers have now come to the conclusion that a deal must be done by Monday morning because no one on the street will trade or lend to Bear Stearns, which is rated a notch above junk bond levels. If the downgrade hadn't happened, Bear management would have had more time to work the Street for a deal, sources said.

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