Aug. 8 (Bloomberg) -- Merrill Lynch & Co. is in talks to hire Mike Nierenberg, a top executive at Bear Stearns Cos. before the firm's March collapse, for a senior post overseeing mortgage trading, three people briefed on the matter said.

Nierenberg, 46, quit this week as head of mortgage-trading and other securitized products at JPMorgan Chase & Co., which bought Bear in May, the company said in a memo confirmed today by spokeswoman Kristin Lemkau. He may join Merrill, the third- biggest U.S. securities firm, said the people, who declined to be identified because they're not authorized to speak. Merrill spokeswoman Jessica Oppenheim declined to comment.

Merrill is rebuilding its mortgage-trading department after writedowns on bonds tied to housing saddled the firm with almost $19 billion of net losses in the past year. Nierenberg joins former Bear Stearns traders recruited for the expertise gained when Bear led sales of mortgage-backed bonds from 2004 to 2006.

``The mortgage-market became illiquid, and that affected everybody in the mortgage market,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. ``But mortgage trading is not going away.''

Nierenberg may be the first senior-level recruit by Merrill's new trading chief, Tom Montag, 51, a former Goldman Sachs Group Inc. executive who joined this week. He was hired by Merrill Chief Executive Officer John Thain, another Goldman alumnus, who stepped in last December after Stan O'Neal was fired because of mortgage losses.

Merrill's mortgage-trading head, Scott Soltas, 42, left in May.

Liquidation

The firm, which last week liquidated $31 billion of mortgage-related collateralized debt obligations at 22 cents on the dollar, still has about $29 billion of trading assets linked to mortgages or other asset-backed debt, according to a quarterly report with securities regulators.

Nierenberg worked at Bear Stearns for 14 years until it collapsed in March and was acquired by JPMorgan. He declined to comment when reached today on his mobile phone.

In April, JPMorgan named Nierenberg to serve with JPMorgan veteran Bill King as co-head of securitized products. Nierenberg became the sole head in May, when King left to join hedge fund Citadel Investment Group.

Matt Zames, who oversees JPMorgan's trading in government bonds, currencies and municipal bonds, will take over structured products on an interim basis, according to the bank's memo.

Nierenberg was co-head of mortgage-trading at Bear Stearns until late 2007 with Jeffrey Verschleiser, who joined Goldman Sachs in June.

Other Bear Stearns mortgage traders hired by competitors include Thomas Marano and Josh Weintraub, who joined GMAC LLC's home-loan subsidiary, Residential Capital; Scott Eichel, who joined Royal Bank of Scotland Group Plc's RBS Greenwich Capital Markets; and Peeyush Misra, who went to Goldman.

``They were very, very good at mortgage trading,'' Hintz said. ``It wasn't a giant disproportionate mortgage loss that took out Bear. It was a loss of confidence because of subprime problems in the marketplace.''

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: August 8, 2008 16:48 EDT