CEO James Cayne to step down at Bear Stearns (MarketWatch) (08-01-2008)

SAN FRANCISCO (MarketWatch) -- After the CEOs replaced at major investment banks such as Merrill Lynch’s Stanley O'Neal and Citigroup's Charles Prince, the subprime mortgage crisis has claimed another victim in Bear Stearns Cos. Chief Executive James Cayne, said a media report on Monday.

According to the online edition of the Wall Street Journal, Cayne has begun notifying board members that he will step down as the firm's CEO, responding to shareholder pressure. Bear Stearns, like other financial services firms, has been hit hard by the subprime mortgage crisis and ongoing credit crunch.

In some ways Bear Stearns has been seen as even more vulnerable to the credit crunch that other firms, due to a higher exposure to U.S. mortgage and fixed-income markets.

Bear Stearns shares have plummeted more than 50% in the past year. The shares fell more than 3% Monday to $76.25, before rising more than 2% in after-hours trading.

Over the summer, two hedge funds managed by the firm collapsed as a result of large bets on subprime mortgages.

And in December, the firm posted its first quarterly loss ever, including a $1.9 billion write-down on its portfolio of residential mortgages and related assets, raising more concerns about its performance under Cayne.

In response to the recent poor performance, Cayne and other executives announced they would be forgoing their annual bonuses for 2007.

Some have taken advantage of Bear Stearns's woes, however. British billionaire Joseph Lewis began acquiring a large stake in the firm earlier this year, buying up weakened shares that as of late December amounted to a 9.57% stake.

Cayne, who was named CEO in 1993, will likely be succeeded by Bear Stearns President Alan Schwartz, the report said.

A Bear Stearns spokeswoman did not immediately respond to a request for comment.

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