There is a fascinating piece in Fortune magazine about Jimmy Cayne, the former chairman and chief executive of Bear Stearns, by William Cohan, the author who is working on a book about the credit crisis.

The most interesting aspect of it is that Mr Cayne himself talks candidly about how he failed to prevent Bear from collapsing and having to be rescued by the Federal Reserve and JP Morgan Chase.

One reason was that he was in no physical condition to do so. He collapsed from a prostate infection last September and lost 30 pounds in weight while in hospital recovering. He was 73 at the time.

But the other is that, as Mr Cayne himself admits, he was the wrong man for the job. His background as a broker, trader and card player did not give him much insight into the chaos in credit markets and he compounded matters by firing Warren Spector, the man who ran Bear’s trading operations.

Mr Cayne summarises his own failure thus:

The options were limited. When you become roadkill, when you happen to have lost some weight and you’re not really healthy, but you know one thing - you know that you have worked your ass off and you’re not smart enough to know the answer - that’s tough.

The overall impression the piece gives is of a fighter long past his prime who could not grapple adequately with Bear’s troubles. Nor could Alan Schwartz, the banker known as “Alan & Co” who took over as chief executive when Mr Cayne lost the confidence of other Bear executives in January.

One striking thing is that Mr Cayne’s rivalry with Alan Greenberg, who recruited him to the bank and was his predecessor as chief executive, never seems to have diminished. Indeed, Mr Cayne partly blames Mr Greenberg for its unsuccessful effort to rescue two hedge funds early in the crisis.

Overall, the notion that Mr Cayne and others cling to of Bear being the victim of outside forces rather than the author of its own misfortune hardly seems to be born out by this account.

Gary Cohn, the co-president of Goldman Sachs, describes the idea of Goldman and a group of hedge funds conspiring to bring Bear down is “just preposterous and laughable”. That is the favoured version of Mr Cayne and others from Bear, but there is little evidence of it.

August 4th, 2008 in Finance | Permalink