Lehman Shakes Up Top Brass, But Investors Wary

Lehman Brothers Holdings has pushed out its chief financial officer, Erin Callan, and chief operating officer, Joseph Gregory, amid a persistent clamor over the company's weak performance.

Erin Callan, Demoted as CFO After $2.8 Billion Loss

The company said Herbert "Bart" McDade will take over as president and COO and Ian Lowitt will succeed Callan in the CFO position. Callan and Gregory are expected to stay with the company in different capacities.

The news comes days after Lehman announced a nearly $3 billion quarterly loss.

The fourth-largest investment bank in the U.S. has been under fire after weak earnings and speculation that it will need to raise $6 billion in capital to stay afloat rattled investors, and has seen its shares under intense pressure.

Joseph Gregory, Removed as COO

Callan in particular has been criticized lately for the company's performance and for not grasping the depth of Lehman's problems.

In a conference call Monday, she rebutted rumors of deeper troubles at the firm and said ithe results of its efforts to raise capital would be a stronger bank going forward.

Callan, 42, has been CFO since September and will stay at the firm "in a senior capacity," the company said.

Gregory, 56, who has been at Lehman for more than 30 years, also will remain with the company in an unspecified role, a Lehman spokesperson said.

Lehman CEO Richard Fuld said in a statement that replacing Gregory "has been one of the most difficult decisions either of us has ever had to make."

Despite the firm's troubles, there was general sentiment Lehman will survive if it can restore the credibility problems it is having on Wall Street. The company said it would not revise its prior forecast.

"It will not make very much money for anybody for a while," Richard Bove, an analyst with Ladenburg Thalman, said on CNBC. "The company's got to rebuild its business model in certain aspects, but I see no reason why it can't survive independent."

Lehman Brothers shares tumbled off the opening bell, but some analysts saw the management changes as a positive development and the stock was well off its lows as morning trade progressed.

"The initial reaction on Wall Street has been negative but I can't help but view it as a positive, assuming that the replacements have greater credibility than their predecessors," said Michael Wallace, global market strategist at Action Economics in San Francisco.

Billionaire investor Maurice "Hank" Greenberg, through a spokeswoman, said he is buying shares in Lehman Brothers Holdings as planned.

Greenberg, who is making the investment through a firm he controls, has not specified exactly how many shares he is buying in Lehman, having characterized it as a "pretty good size stake." He decided to take the stake earlier this week, after Lehman announced plans to boost capital.

Callan, who in recent months has been the public face of Lehman, is the latest in a stream of high-profile Wall Street executives who have been fired or demoted, amid the widening credit crisis. Her demotion left Wall Street with virtually no women in senior management roles.

Some investors wondered why Fuld wasn't taking more of the blame for Lehman's stumbles, which for some investors have recalled Bear Stearns Cos' woes before it ultimately collapsed.

"I think there's just a fear that the problems at Lehman are deeper than what Fuld thought," said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management, Rochester, N.Y. "What does this say about his oversight? He's taking a hit to his credibility, and it all rolls up to him."

--Reuters contributed to this report.

© 2009 CNBC.com