Bear Stearns President Resigns, Casualty of Credit Crisis
Bear Stearns President and co-Chief Operating Officer Warren Spector resigned on Sunday, becoming a casualty of a credit risk crisis at the investment bank.
Spector's departure follows Bear Stearns' assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Standard & Poor's warned that the recent collapse of two Bear Stearns-managed mortgage funds could hurt the company's performance and reputation for an extended period.
The collapse of the funds triggered a downturn across credit markets, put a damper on corporate buyout financing and sparked fears about Wall Street's trading and banking profits.
Spector's departure is a blow to Bear Stearns because he was regarded as a possible successor to Chairman and Chief Executive James Cayne.
Cayne said in a statement on Sunday: "In light of the recent events concerning BSAM's high grade and enhanced leverage funds, we have determined to make changes in our leadership structure."
Bear Stearns said that, effective immediately, Alan Schwartz has been named the company's sole president, and Samuel Molinaro will become chief operating officer as well as chief financial officer.
Bear Stearns also said that Jeffrey Mayer, co-head of the fixed income division, has been named to the Bear Stearns executive committee.
Bear Stearns said Schwartz joined the company in 1976, becoming head of the investment banking division in 1985. Schwartz was named president and co-chief operating officer in June 2001.
Molinaro joined Bear Stearns in 1986 and 10 years later was promoted to CFO. In 2002, Molinaro was named a member of Bear Stearns' executive committee.
Mayer joined Bear Stearns in 1989, became the head of the mortgage department seven years later and has been co-head of the global fixed income division with Craig Overlander since 2002.
Bear Stearns spooked investors on Friday by saying it has halted share buybacks to preserve capital as it faces the most difficult debt markets in more than two decades.
Bear Stearns held a hastily arranged conference call on Friday after S&P changed its rating outlook on the company to "negative" from "stable," flagging a greater chance of a credit downgrade in the next two years.
While the conference call was aimed at soothing investors' fears, the call, featuring CFO Molinaro and, briefly, CEO Cayne, seemed to exacerbate them as the company's stock lost. Bear Stearns stock closed $6.78 lower at $108.85 on Friday, after dropping as much as 7.9% to its lowest since November 2005. That was its worst intraday drop since Sept. 17, 2001, the first day of trading after the Sept. 11 attacks.