Cayne bows out of Bear Stearns
James Cayne, chairman and chief executive of Bear Stearns, is the latest bank executive to lose his job as a result of large quarterly losses, according to news reports. The firm’s president, Alan Schwartz, who has been with the firm since 1976, is expected to take his place as chief executive. Cayne will remain as non-executive chairman.
Bear Stearns’ reputation as a powerhouse among fixed-income dealers has been badly bruised as the value of its collateralised debt obligation and mortgage-backed securities (MBS) with subprime exposure has continued to tumble.
On November 30, the firm reported its first quarterly loss in the firm’s history, writing down $1.9 billion – $600 million more than it expected at the beginning of the month. In July, the firm shut the doors of two internal hedge funds – Bear Stearns Asset Management’s High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund – which at one point controlled over $900 million in aggregate assets under management. This occurred despite a $1.6 billion cash injection in June.
The price of Bear Stearns shares dropped after Cayne’s removal was first reported in the Wall Street Journal, with mid-day, intra-day composite trading at $75.08, down from the closing price of $76.25 the previous day. On January 3, 2006, the firm's shares traded at $161.39.
Brad Hintz, a New York-based senior analyst at Bernstein Research, believes the change in guard will not shield the firm from challenges. “The bond market has changed - unlike other fixed-income cycles, a booming MBS recovery is unlikely to occur in 2008-2009,” he said. “The expected decline in 2008 MBS, combined with the shift of the mortgage market away from higher-margin non-conforming and toward low-margin agency MBS, makes the outlook for Bear Stearn's 2008 fixed-income earnings challenging.”
See also: Write-downs mount in run-up to Christmas
Bear Stearns slashes 650 jobs
Bear profits tumble by 61% as Goldman's rise 79%
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on People
People: New brooms at NatWest and Tradeweb; MUFG splits rates, and more
Latest job changes across the industry
Bank of America’s Kris Fador elected FS-ISAC board chair
Industry consortium for cyber security also adds new board directors from Swift, PNC, Truist and CME
People: Barclays’ macro trade reshuffle, UBS board moves, and more
Latest job changes across the industry
Asia moves: Senior hires at HKEX, UBS and more
Latest job news from across the industry
People: Citi lures JPM private bank CRO, Körner crowns Credit Suisse exits, and more
Latest job changes across the industry
People: Isda taps four new directors, O’Callaghan joins CA, Berlinski quits Goldman, and more
Latest job changes across the industry
People: Citi snags Raghavan, SocGen bags Estrada, all change at NYCB, and more
Latest job changes across the industry
Kane to leave Citadel Securities for senior Miax role
Options exchange has been on a four-year acquisition spree