Failed former Bear Stearns absentee CEO Jimmy Cayne is in the news today:
James “Jimmy” Cayne, chairman [and, until January, CEO] of Bear Stearns, sold his shares in the crippled securities firm for $61.3 million…
Cayne sold 5.66 million shares at $10.84 apiece on March 25 [two days ago], according to a regulatory filing today.
The value of his stake plummeted from almost $1 billion last year, when the shares peaked at $171.50 before the collapse of the subprime mortgage market toppled two of the firm’s hedge funds and prompted a contraction in credit markets worldwide [and the effective bankruptcy of Bear Stearns, rescued from real bankruptcy at the last possible moment only by a $30 billion loan from the US taxpayer via the Federal Reserve].
Allow me to translate from the Wall Street:
The US taxpayer is loaning Bear Stearns and JP Morgan Chase, Bear Stearns’ acquirer, $29 billion — just revised from $30 billion, simultaneous with JP Morgan Chase raising its acquisition price for Bear Stearns to $10/share from $2.
Without that $29 billion of taxpayer money, Jimmy Cayne’s stock would be worth $0/share, and if you multiply that by 5.66 million shares, the total would be $0.
The $29 billion taxpayer loan is almost certain to lose money as it is being used to backstop stinky assets on the Bear Stearns balance sheet — the same assets whose plummeting fall in value catalyzed Bear Stearns’ effective bankruptcy.
It is virtually certain that taxpayers are going to take some loss on that $29 billion loan.
When we do, we will have the immense satisfaction of knowing that the first $61.3 million of those losses represent a direct cash transfer from US taxpayers to Jimmy Cayne.
I wonder if there’s any more color out there on this…
In the past weeks, together with his wife… who is a student of Jewish religious traditions, Mr. Cayne has spent considerable time searching for comparable events in religious history to see what lessons can be learned from the collapse of his firm, said a person who has spoken to him recently.
Oh yes, that episode where the money changers in the temple leveraged their business up 40-to-1 and then went bankrupt, but got bailed out by a loan from the Roman citizenry of 29 billion pieces of silver, comes immediately to mind.
[Source: New York Times.]
A friend of mine who is a significant expert on US securities law told me something interesting a couple years ago, after Sarbanes-Oxley passed.
He said, you know, Marc, the laws on public company governance and controls — particularly the responsibilities of the CEO — are now so intense and so tight that I bet if you had subpoena power for any public company in the country, you could prove some form of criminal violation by the CEO.
No matter how honest and upright the individual — the laws are so strict and there are so many details that have to be correct, almost any CEO could be found guilty of and sent to jail for something.
I suggest Jimmy Cayne as an excellent test case.