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Bear Stearns CEO quitting amid losses
The Los Angeles Times
January 8, 2008
Bear Stearns Cos. Chief Executive James Cayne is resigning under pressure from shareholders upset over the Wall Street firm's losses amid a slew of problems sparked by the sub-prime mortgage crisis, according to a published report.
Cayne, 73, started notifying Bear Stearns directors Sunday that he planned to give up his CEO post but remain as chairman, the Wall Street Journal reported on its website Monday night, citing unidentified people the paper said were familiar with the matter.
Alan Schwartz, the company's president respected for his deal-making savvy, is expected to succeed Cayne as CEO. Schwartz is 57.
Company representatives couldn't be reached for comment late Monday.
Bear Stearns, one of the nation's biggest underwriters of mortgage-backed bonds, might be the Wall Street investment bank most directly exposed to this year's credit squeeze. Last summer two Bear Stearns hedge funds set up to bet on risky mortgage debt collapsed, helping set off a broad credit crunch.
Bear Stearns recorded a fiscal fourth-quarter loss, the first quarterly deficit in the company's 84-year history, as the firm wrote down billions of dollars in debt securities. Its profit for all of fiscal 2007 plunged 89%. The results prompted Cayne to pass on his 2007 bonus. Members of the company's executive committee also did not receive year-end bonuses.
The company's stock is down 53% in the last year.
But until now, 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. A nearly 40-year veteran of Bear Stearns, Cayne took the CEO job in 1993 and became chairman in 2001.
Cayne later came under fire after the Journal reported that as the two Bear Stearns hedge funds faced insolvency, he was playing golf and bridge without access to e-mail or a telephone.
Paulson considers homeowner aid
Treasury Secretary Henry M. Paulson Jr. raised the possibility that some sort of "systematic approach" may need to be developed to help homeowners with good credit whose mortgages are resetting to higher monthly payments.
Paulson last month brokered an agreement reached by mortgage lenders, servicers and investors that is designed to help sub-prime homeowners avoid foreclosure. Prime borrowers -- people with good credit histories -- aren't eligible for that program, which will freeze interest rates on some mortgages for five years.
But in a speech Monday in New York, the Treasury chief said enhancements to the initiative might be extended to "adjustable-rate mortgages other than sub-prime if it will benefit homeowners and investors."
The steep slump in housing has been a serious drag on the overall economy, boosting fears that the country could topple into a recession.
Paulson called the current housing downturn unavoidable after what occurred during the five-year boom in which sales and prices climbed to record levels.
"After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary," Paulson said.
He said the correction was taking a toll on the economy that would continue for months.
"It will take additional time for markets to regain confidence," the Treasury secretary said. "The overhang of unsold homes will contribute to a prolonged adjustment and poses by far the biggest downside risk."
Mortgage lenders cut 86,000 jobs
U.S. mortgage lenders cut more than 86,000 jobs last year as the housing market deteriorated, data released Monday show.
California was hit hardest by the cuts, with a net loss of 15,933 mortgage positions, or 19% of the nationwide job loss, MortgageDaily.com said.
Calabasas-based Countrywide Financial Corp. made the most cuts, eliminating a net 11,665 jobs. Melville, N.Y.-based American Home Mortgage Investment Corp. cut 6,628 jobs. Tucson-based First Magnus Financial Corp. lost 5,948 positions. Irvine-based New Century Financial Corp. slashed 5,200.
The job losses in 2007 would have been greater had JPMorgan Chase & Co., the third-largest U.S. bank, not added a net 4,465 jobs, MortgageDaily.com said.
Relatively strong lenders such as Wells Fargo & Co. have said they expect to add market share as weaker rivals retrench.
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