March 18, 2008—
As investment bank Bear Stearns collapsed, and was sold to JPMorgan
Chase for a scant $240 million, its chairman James Cayne played bridge
at a tournament last week in Detroit over two critical days, like Nero
fiddling away as Rome burned.
Cayne's decision to remain at the tournament as the company's CEO Alan
Schwartz negotiated with JPMorgan Chase to sell Wall Street's fifth
largest investment firm for $2 a share, 90 percent less than its value
last week, has been criticized as indicative of a senior management team
that was distinctly out of touch.
Thousands of the company's employees whose savings were wrapped up in
Bear Stearns stock options may have been ruined overnight, and a new
light has been focused on the company's executives' spectacular downfall
and their own investments. As for Bear Stearns' 14,000 employees, many
will lose their jobs and all of them have seen the value of their stock
options evaporate overnight.
An average Bear Stearns employee who had $200,000 in a retirement fund
now has just $2,000.
" These were secretaries. They don't even live in Manhattan. They [are]
commuting from New Jersey and Long Island and leading relatively modest
lives and suddenly they've had major nest eggs wiped out," James
Stewart, editor at large at Smart Money, said today ABC's "Good Morning
Fearing a cash shortage, real estate clients caused essentially a run on
the bank, withdrawing $17 billion in two days last week. Facing the
prospect of bankruptcy, Schwartz sold to JPMorgan for a song compared
with its value of $20 billion just three months ago.
Executives, including Cayne and Schwartz, took substantial hits to their
portfolios, losing many millions of dollars. None of the company's
leaders, however, had compensation deals to cushion their untimely fall,
said Paul Hodgson, a senior research associate at the Corporate Library.
"Will this affect Cayne?" asked Hodgson. "Absolutely, it will. He was
exposed heavily to company stock, but he also had access to a diversity
of investment vehicles with a range of shares in them rather than single
stock. He is hurt, but by no means has his entire personal wealth been
Cayne still owns a 5 percent stake in the company. Before last week he
was estimated to be worth about $1 billion. Cayne, 74, stepped down as
CEO in January after 15 years and much of the blame for the collapse has
been placed on him. He owns 5.6 million shares, which last month were
valued at $80 a piece or $449 million. The JPMorgan Chase sale values
those shares at just $11.2 million.
For most people $11 million is no small piece of change, but that figure
represents a fraction of Cayne's total assets.
Searches of public records by ABC NEWS discovered Cayne owned properties
in New York City, Chicago and several cities in California.
In 2002, Cayne reportedly paid over $8 million for an historic Manhattan
townhouse he later gave to his son.
Schwartz also took a big hit. Schwartz, like Cayne, had spent his life
at Bear and was a serious bridge player. He had earned a reputation for
being a gambler, and after just three months at the company's helm, is
tasked with overseeing its collapse.
"Ultimately, Schwartz and Cayne and all of Bear Stearns' employees are
huge owners of stock," said Mark DeCambre, a senior writer at
TheStreet.com. "A third of the company's stock is owned by employees. No
one is coming out of this unscathed, but the guys at the top have much
less to worry about."
Schwartz owns over one million shares of Bear stock, valued at $82
million in February and now worth just $2 million.
A search of public records found Schwartz also owns property along
Madison Ave. in New York City, and in the tony suburb of Scarsdale, N.Y.
"It is hard to cry for the big guys when so many of the rank and file
lost everything. The bigger guys are going to make out somewhat O.K.,
their stock will be converted to JPMorgan stock."
JPMorgan will give investors 0.05473 shares of its common stock for
every share of Bear Stearns they own. But that's still equal to just $2
a share compared with $170 at its peak a year ago.
Meanwhile Bear Stearns' 14,000 employees will now wait to see wgho will
lose their jobs.
As Michael Douglas, playing Gordon Gekko in the movie "Wall Street,"
famously said, "Somebody wins, somebody loses. Money itself isn't lost
or made, it's simply transferred from one perception to another. ...
Greed is, for lack of a better word, is good. "
Civis Romanus Sum
Golden parachutes for the Execs and concrete overshoes for secretaries
and clerks. You would think that after Enron and Worldcom workers would
know better than to put all of their eggs in one basket. That is like
playing Russian Roulette with a .45 and one round in the magazine.
Civis Romanus Sum
>[Default] On Tue, 18 Mar 2008 08:54:41 -0400, Jim Higgins
>Yes, greed is good and in fact it is great as a force to motivate
>people to work hard, save, invest and otherwise build portfolios. But,
>while money may not be lost, wealth can be lost overnight. As we have
>seen in too many cases.
>This is just flat wrong. These guys should have all their worldly
>goods seized, sold, and proceeds distributed to stockholders of
Since this isn't Russia, 1918, that isn't going to happen. The world
>Any employee who puts all their retirement chips into the company they
>work for is a fool. If their company crashes, they lose both job and
>all their retirement savings. It is just stupid and professional
>advisors have been saying so for decades.
Back when I was working I repeated that mantra to my fellow employees
over and over again. Mostly they didn't listen to me. They lived to
I've never understood why the huge investors, like state retirement
fund administrators, etc., don't form some sort of an alliance and put
some pressure on corporations who pay their executives huge salaries.
One can only wonder how much the typical worker loses over a lifetime
in his retirement account because of exorbant executive salaries and
Who owns these corporations anyway? The stockholders or the people who
manage the corporations.