UPDATE 2-Bear sees a $200 mln muni loss, $88 mln write-down

(Recasts with separate filing on Bear Stearns business fall-off in days before merger)

NEW YORK, April 11 (Reuters) - In the days after Bear Stearns Cos BSC.N agreed to be bailed out by JPMorgan Chase & Co (JPM.N), it had by then seen its meat-and-potatoes trading activity fall by more than half and much of its other income slip away, the investment bank said in a filing late Friday.

In a separate filing, Bear said it will probably incur $288 million of losses in the second quarter stemming from a municipal bond program and a write-down. Bear did not indicate how large its total losses in the quarter might be.

After seeing its trading partners vanish and its liquidity dry up, Bear Stearns agreed on March 16 to be acquired by JPMorgan Chase & Co.

By March 24, institutional equity and fixed income commission and sales activity had plummeted to well below 50 percent of their levels in 2007 and in the first quarter of 2008, the company said in a filing with the Securities and Exchange Commission.

Customer margin balances were off 23 percent from Nov. 30, at $66 billion. Customer shorts fell to $66 billion, down from $88 billion at the fiscal year end.

Assets under management fell to $36 billion by March 24, down 20 percent from $45 billion at fiscal year end.

"As a result, the franchise has experienced substantial deterioration of its earnings capacity," the company said in the filing.

JPMorgan agreed last month to acquire Bear in an all-stock transaction first valued at $2 per share, then raised to $10 per share. The acquisition is expected to close by June 30.

Bear said it likely would not be able to survive the loss of customers and trading partners should the acquisition fail to close.

"Accordingly, the company could be forced to file for bankruptcy protection and need to liquidate," Bear said in the filing.

In a separate filing with the SEC, Bear said it recognized $200 million of losses related to some trust certificates under a municipal tender option bond program.

Under the program, Bear created securities trusts that buy municipal bonds financed by the issuance of trust certificates. It said that after March 10, holders of all Class A certificates tendered them to the company, causing the loss.

In addition, Bear said it will probably record an $88 million loss to write down goodwill and intangible assets, based on the proposed merger agreement with JPMorgan.

Bear has yet to report first-quarter results, but on Thursday said it expected them to be "significantly lower" than a year earlier, when profit totaled $553.7 million, or $3.82 per share. It also said it expected to file its quarterly report by April 14.

As part of the transaction, JPMorgan agreed to buy 95 million newly issued Bear shares, for a nearly 40 percent stake. That purchase closed this week.

Bear shares closed Friday up 2 cents at $10.22. (Reporting by Jonathan Stempel and Ilaina Jonas; Editing by Gary Hill)