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Tuesday, January 08, 2008

The Resignation of Jimmy Cayne

The resignation of James E. Cayne as the CEO of Bear Stearns comes as no surprise to anyone following the subprime crisis. Bear Stearns stands out as one of the primary securitizers of subprime mortgage backed securities and many consider the collapse of its two hedge funds this summer the spark that ignited the subprime forest fire. Since the collapse, Bear Stearns has been besieged by investor lawsuits - including those filed by Zamansky & Associates on behalf of institutional and high net worth investors - regulatory investigations and multi-billion write-downs resulting in huge losses in shareholder’s equity.

Many will praise Mr. Cayne’s leadership, and perhaps rightly so, since under his control the firm’s stock price rose from $16 to over $100. But along the way hundreds of investors have filed arbitration cases and Bear Stearns has paid out hundreds of millions of dollars in regulatory fines. Indeed, Mr. Cayne’s legacy will be difficult to spin positively.

Taking his place as CEO will be Alan Schwartz, currently serving as Bear Stearns’ president. It is my sincere hope that the leadership change will also elicit change in the way that Bear Stearns treats its investor clients and belief in strict regulatory compliance.


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