Bear Stearns shares fell Tuesday on reports that its chief executive, James Cayne, has resigned.
Cayne, who will be 74 years old in a few weeks, is leaving Bear amid widespread concern over his management of the Wall Street firm that has been hammered for large bond market losses and the implosion of two hedge funds tied to the subprime bond market, CNBC has learned.
Cayne will turn over the top job to Alan Schwartz, who is the firm's former president and head of investment banking. The move will be made official at a board meeting Tuesday afternoon.
Cayne will remain as chairman of the firm, but a Bear Stearns official with knowledge of the matter said Schwartz will be running the day-to-day operations of the firm.
Until recently, Cayne had one of the longest and strongest runs of any CEO on Wall Street. He took over the top job in 1993.
Last year shares of Bear Stearns traded at around $170. But the firm has been battered by its exposure to the subprime debt market. Two of its hedge funds that invested in those securities imploded leaving many Bear clients with huge losses, and sparking a criminal investigation into the matter.
Bear also had to take a writedown of more than $1 billion because it held such risky securities on its books. All this came amid growing questions about Cayne's ability to manage the firm. As reported by CNBC, Cayne had a health scare late last year. He was also accused of not being attentive to the firms growing financial problems.
CNBC was first to report that the board of Bear Stearns in recent weeks had been actively considering a successor to Cayne, namely Schwartz, who would be named CEO while Cayne would be named president. It was in fact this compromise that the board of Bear Stearns in recent days agreed upon as a way to ease Cayne out of the job he held for so long.