Risk-taker submits to its rival

Formed in 1923 by Joseph Bear, Robert Stearns and Harold Mayer with $500,000 in capital, Bear Stearns had by last year grown into the nation's fifth-largest investment bank. It ranked 138 in the Fortune 500 list of the biggest American companies, with $2 billion in profit, more than 14,000 employees and offices in Chicago, Los Angeles, Beijing, London and other major cities.

But over the years, the firm developed a reputation for aggressive securities trading -- due in part to its penchant for selecting up-by-the-bootstrap types to run the company.

Its chief during the 1950s and '60s was a former trader, Salim "Cy" Lewis, who started as a runner at Salomon Bros. The chief executive from 1978 to 1993 was Alan "Ace" Greenberg, a Kansas native and former trading desk clerk who oversaw the company's debut as a publicly traded company in 1985.

The company's appetite for risk made it a major player in the corporate takeover arena in the 1980s and the expansion into Latin America in the 1990s. But its aggressive style caused problems on several occasions. The firm was badly scarred by the 1994 bond market crash, and it was repeatedly hit with lawsuits related to junk bonds, sales tactics and fizzled stock offerings.

Greenberg's handpicked successor, James Cayne, was noted for taking a more cautious approach than Greenberg, often bringing in consultants to help with big decisions. But that didn't prevent the firm from becoming a leading victim of the sub-prime mortgage crisis, which began last year to take a heavy toll on firms that had invested in exotic securities tied to the housing market.

Last summer, Bear Stearns revealed that two of its hedge funds that had invested heavily in sub-prime debt had lost almost all of their value. The funds' demise set the stage for an $854-million fourth-quarter loss -- the first in the firm's history -- which was followed by Cayne's resignation in January. He had been criticized for playing golfand attending a bridge tournament while the sub-prime crisis unfolded.