The Five Dumbest Things on Wall Street: March 20

2. Bear's Cayne: Up in Smoke

Where was Jimmy Cayne when his firm was collapsing last week? You guessed it: he was playing bridge.

The former CEO and largest shareholder of Bear Stearns was at a bridge tournament in Detroit last week when the bank began to unravel. Cayne owns or controls about 7 million shares of Bear Stearns. His stake was worth over $1 billion in January and is now worth about $14 million at the firm's $2-a-share purchase price.

Let's hope the 74 year-old had a higher time at the card table than he did in the stock market last week.

Bear Stearns -- trading at close to $80 a share at the beginning of this month -- was acquired in a fire sale for a stunning $2 a share by JPMorgan Chase, with $30 billion in emergency funds provided by the Fed. The deal came less than three days after the Fed announced it would attempt to bail out the company, which proudly abstained from the 1998 bailout of Long Term Capital Management out of a sense of high principles.

The shocking disintegration of a major Wall Street investment bank concludes a chapter that began last summer when Cayne made headlines by being incommunicado at a bridge tournament while two hedge funds heavily invested in mortgage securities collapsed. The Wall Street Journal subsequently reported Cayne's affinity for smoking in public bathrooms.

Following that bridge tournament, Bear Stearns attempted to dump its junk mortgage securities onto the public in an initial public offering of a financial company that the firm called Everquest Financial, and Cayne lost his job. But now his successor, a former bridge partner, has made his own contribution to Wall Street lore. When trouble began last week, Alan Schwartz was hosting a Bear Stearns media conference in Palm Beach, according to the Wall Street Journal. He left on Wednesday to do a damage-control interview on CNBC.

"Bear Stearns' balance sheet, liquidity, and capital remain strong," Schwartz declared on the airwaves. "Our liquidity position has not changed at all, our balance sheet has not changed at all."

M'kay. On Friday, the firm said its "liquidity position in the last 24 hours had significantly deteriorated."

Before long, the place was sold to JPMorgan for a mere $236 million--less than the company paid its five highest officers from fiscal 2004 through 2006, according to The Wall Street Journal. Meanwhile, investors that are now celebrating earnings reports from other suspect Wall Street firms like Lehman Brothers LEH would do well to remember that Bear Stearns was preparing to report a first-quarter profit before the run on the bank began.

Eight years ago, Cayne mused that he might consider selling the 85-year-old investment bank for four times what it values itself on its books.

Dumb-o-meter score: 91 What was he smoking?