Bear Stearns (BSC): James Cayne Does Something Right For Once

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James Cayne, chairman and, before he was asked to leave, CEO of Bear Stearns (NYSE: BSC) sold all of his holdings in the firm for $61 million, according to filings with the SEC. We noted today that Cayne sold 5.66 million shares at $10.84 apiece on March 25.

When the shares were over $170 last year, he was doing even better.

Cayne developed a reputation of being busy playing golf and had been accused publicly of smoking pot while his firm was falling apart. Cayne also plays bridge, and for once he was keeping his eyes on both his cards and the money in the center of the table.

The chairman probably reasoned that $10 was as good as it would get for Bear Stearns. There has been a lot of wild talk about a higher offer. Now Congress wants to look into the Fed’s role of supporting JP Morgan (NYSE: JPM) in its buy-out of Bear. They don’t understand that the central bank now has an M&A department

The whole deal still has risk in it. JP Morgan has gotten its hands on the BSC headquarters and enough of the company’s shares to close a deal. But, investors are already filing suits saying that they were robbed when the big money center bank offered $2 for the broker and then upped it to $10. It did look like a bank job done under the cover of darkness, or, in this case, on the weekend.

A lot of Congressmen who still like to eat with their fingers feel the need to have hearings. It does not occur to them that so much money was withdrawn from Bear Stearns by large customers that the company could not last another day. Bernanke and his friends did not invent that story. Putting $30 billion into the deal is not likely to be their idea of a good time.

Cayne took the money and ran. He did the right thing. As captain, or captain emeritus, he left the ship early. Lifeboats were still aplenty. But, he is an old man and age has its privileges.

The ridicule will start now and last for years. Cayne should have stayed in the stock to show confidence in the JPM deal. The collapse of the firm was at his feet. Any risk going forward should be shared by him.

Why stay around when you are not wanted? He leaves now along with a huge number of Bear employees who are getting the shaft in the merger.

Will the last one to leave please turn out the lights?

Douglas A. McIntyre