Spitzer Spit Out; Mr. Mozilo Goes to Washington; Bear's Cayne: Up in Smoke; Not Dead Yet; Yahoo!'s New Search; Schwarzman Bashes Birthday; Lamenting Lehman; AIG's Hunting Party; GM Jettisons Jet; Christopher Cox Clouseau; Credit Crunch Chaos
By Nat Worden , 03/20/08 Where was Jimmy Cayne when his firm was collapsing last spring? You guessed it: he was playing bridge. The former CEO and largest shareholder of Bear Stearns was at a bridge tournament in Detroit when the bank began to unravel. At the time, Cayne owned or controlled about 7 million shares of Bear Stearns stock. His stake was worth over $1 billion in January and in March was briefly worth about $14 million at the firm's then $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 March -- was acquired in a fire sale for a stunning $2 a share by JPMorgan Chase ( JPM), with $30 billion in emergency funds provided by the Fed. Although the bid was later raised to $10, more out of sympathy than necessity, 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 in the summer of 2007 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. Cayne eventually lost the top job to Bear investment banking star, and his former bridge partner, Alan Schwartz, in January 2008, as he retired to the role of non-executive chairman. Schwartz, however, could not turn the ship around in time. When trouble began in March, Schwartz departed a Bear Stearns media conference 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." Two days later the firm said its "liquidity position in the last 24 hours had significantly deteriorated." Within 48 hours, 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 . Eight years prior , Cayne mused that he might consider selling the 85-year-old investment bank for four times what it values itself on its books. Ultimately, that goal proved a bridge too far. Update 12/26: On March 27, 2008, Cayne sold his entire stake in Bear Stearns, over 5.61 million shares, for $10.82 a share. This stake was sold prior to the vote on the renewed $10 bid by JP Morgan for Bear Stearns. When asked by Fortune magazine in August how he felt about selling the 85 year old firm, Cayne responded "I felt nothing."