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Bear Stearns' Cayne joins exodus of chiefs

January 09, 2008|From Bloomberg News

Brokerage Bear Stearns Cos. confirmed Tuesday that longtime Chief Executive James "Jimmy" Cayne had stepped down, marking the third CEO departure from a major investment bank since the sub-prime mortgage crisis began to hammer Wall Street last spring.

Cayne, whose exit had been rumored on Monday, handed the company's reins to its president, Alan Schwartz, as expected.

But Cayne, 73, will stay on as chairman as the firm tries to recover from heavy losses on mortgage-backed securities, the brokerage said. Cayne holds 4.9% of Bear Stearns' shares, making him the firm's second-largest individual investor.

The stock fell $5.08 to $71.17 before the news Tuesday, amid a broad market sell-off.

Cayne, Bear Stearns' chief since 1993, was the longest-serving CEO on Wall Street.

The firm has long been viewed as one of the brokerage industry's savviest trading operations. But its reputation, and Cayne's, were slammed last summer after the collapse of two hedge funds the firm had set up to invest in risky mortgage bonds.

Cayne came under further pressure after the firm in its fiscal fourth quarter recorded its first-ever loss after writing down the value of mortgage securities.

The mortgage crisis also led to the departures of the CEOs of Citigroup Inc. and Merrill Lynch & Co. in recent months.

Schwartz, 57, started at Bear Stearns' Dallas office in 1976 as an institutional stock salesman. Since 1985 he has headed the firm's investment banking unit, and was named president of the company in 2001.

A Brooklyn native and 1972 graduate of Duke University, Schwartz was drafted as a pitcher by the Cincinnati Reds baseball club but injured his elbow and never reported to the team.

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