NEW YORK (AP) - Bear Stearns Cos. said Sunday that co-President and co-Chief Operating Officer Warren Spector has resigned following the meltdown of two hedge funds that invested in risky mortgage-backed securities.
Effective immediately, Alan Schwartz, who had been Bear Stearns' other co-president and co-COO, will become the sole president, and Samuel Molinaro Jr. will assume the role of chief operating officer in addition to his current duties as chief financial officer, the firm said in a statement issued Sunday afternoon. Jeffrey Mayer, co-head of the fixed income division, will take Spector's seat on Bear Stearns' executive committee, the firm said.
'In light of the recent events concerning (Bear Stearns Asset Management's) High Grade and Enhanced Leverage funds, we have determined to make changes in our leadership structure,' Chairman and Chief Executive James Cayne said. 'I have every confidence in this team to continue Bear Stearns' 84-year legacy of success and profitable growth.'
Spector, 49, had spent his entire career at Bear Stearns since joining the firm as a trader in 1983 and had been considered a likely successor to Cayne, 73.
But the meltdown of the two hedge funds in a unit Spector oversaw put him and the firm under pressure. The hedge funds filed for bankruptcy protection last week because of their exposure to wrong-way bets on securities backed by mortgages for people with less than stellar credit.
On Friday, Standard & Poors said it was considering cutting its rating on Bear Stearns' creditworthiness because of the firm's exposure to the distressed mortgage and corporate buyout markets.
Separately, another ratings agency, Fitch Ratings, downgraded $46.4 million worth of Bear Stearns bonds backed by subprime mortgages, or home loans to people with spotty credit histories.
The news sent the Wall Street brokerage's shares tumbling to their lowest price since November 2005. The shares, which have lost nearly one-third of their value this year, fell $7.28, or 6.3 percent, to close Friday at $108.35.
Bear Stearns has said the problems with the hedge funds were isolated incidents and 'by no means an indication of broader issues at Bear Stearns.'
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