Bear Stearns Chief Executive James Cayne is resigning under pressure from shareholders upset over the firm’s losses amid a slew of problems sparked by the collapse of mortgage markets, The Wall Street Journal reported Monday.
Mr. Cayne was expected to be replaced by Bear Stearns President Alan Schwartz, a 57-year-old investment banker respected for his deal making savvy.
Mr. Cayne started notifying Bear Stearns’ board on Sunday that he plans to give up his post but remain as chairman, the Journal reported on its Web Site, citing unnamed people familiar with the matter.
Bear Stearns representatives did not immediately return phone and e-mail messages seeking comment late Monday.
Mr. Cayne, 73, had been under scrutiny since the summer, as the liquidity crisis pushed scores of mortgage lenders out of business, bled more than $100 billion from Wall Street’s books, and coaxed the Federal Reserve to cut interest rates by a full percentage point.
The company, one of the biggest underwriters of mortgage-backed bonds in the U.S., may be the Wall Street investment bank most directly exposed to this year’s credit squeeze.
But until now, Mr. Cayne had managed to keep his job even as peers like Citigroup Inc.’s Charles Prince and Merrill Lynch & Co.’s Stan O’Neal lost theirs fast cash loans. A nearly 40-year veteran of Bear Stearns, he took the CEO job in 1993 and became chairman in 2001.
Some people point to the collapse last summer of two Bear Stearns hedge funds set up to bet on risky mortgage debt as the trigger for the subprime mortgage crisis, which began as people with tainted or weak credit history started defaulting on their loans.
Mr. Cayne later came under fire after the Journal reported that as the two hedge funds were going bankrupt, he was playing golf and bridge without access to e-mail or a telephone.
Bear Stearns Cos.’ fiscal fourth-quarter loss, the first in its 84-year history, and the collapse of the hedge funds, prompted Mr. Cayne to pass on his 2007 bonus. Members of the company’s executive committee also did not receive year-end bonuses.
Bear Stearns’ profit plummeted 89 per cent in fiscal 2007 as the bank wrote billions of dollars of bad debt off its books. The company’s stock had lost almost 47 per cent of its value as of late December.
The company and other firms have seen writedowns from investments in subprime mortgages and fixed-income trading come in much steeper than first expected.