Jimmy Cayne, the irascible, iconoclastic and penultimate chief government of the defunct funding financial institution Bear Stearns, has died aged 87 in Lengthy Department, New Jersey, after struggling issues from a stroke.
He led the agency as a prime government for 22 years (together with 15 as chief government) via a lot of its biggest triumphs — amongst them, as a champion of its 1985 preliminary public providing, its immense profitability as a powerhouse in underwriting mortgage-backed securities and, lastly, into the circle of elite Wall Road funding banks that included each Goldman Sachs and Morgan Stanley — in addition to via its many tragic errors.
His salesmanship, his cleverness, his sharp elbows and his resolution to hardly ever, if ever, promote a share of Bear Stearns inventory earned him, at one level, a fortune of $1bn, making Cayne the primary Wall Road chief government to succeed in that milestone solely via the possession of his personal agency’s inventory.
However Cayne additionally had horrible blind spots. When, in 1998, the US Federal Reserve, terrified of potential monetary contagion, was making an attempt to trend a rescue plan for the collapsed hedge fund, Lengthy Time period Capital Administration, Bear Stearns was the one massive Wall Road agency to not take part because the Fed was passing the hat for the LTCM bailout.
In failing to pony up, Cayne insisted that as LTCM’s clearing financial institution, Bear Stearns had already misplaced sufficient cash on account of the highly effective hedge fund. His resolution peeved his friends on Wall Road, together with Henry Paulson, then chief government of Goldman.
There are those that nonetheless consider Cayne’s impulsiveness got here again to chew Bear Stearns a decade later. In March 2008, Paulson, by then US Treasury secretary, initially balked at bailing out Bear Stearns earlier than he, Ben Bernanke, the chair of the Fed, and Tim Geithner, the president of the New York Fed, normal an answer that conveyed the damaged funding financial institution into the arms of JPMorgan, for a fraction of what it had as soon as been value, as a approach to keep away from a near-certain chapter submitting.
Cayne’s different existential errors included one other resolution, in 2007, to have Bear Stearns turn into the in a single day lender to the 2 affiliated hedge funds that had invested closely in varied mortgage-backed securities, simply as different Wall Road banks have been retreating from making such short-term, secured loans as a result of cracks forming out there for these securities.
When the 2 hedge funds have been liquidated in July 2007, Bear Stearns seized the collateral that secured its loans, sticking them on its once-pristine steadiness sheet. As the worth of the collateral declined all through 2007, Bear Stearns needed to take big mark-to-market write-offs, ensuing within the first quarterly loss in its historical past and inflicting a lack of confidence in Cayne’s administration.
That very same collateral proved moreover poisonous three months later, in March 2008, when Bear’s in a single day lenders declined to supply the agency with the short-term secured financing it required each day. The agency was compelled to both file for chapter or accede to its hearth sale to JPMorgan.
Cayne, who was one of many world’s best bridge gamers, hated to lose and he was typically incommunicado at fancy bridge tournaments when he ought to have been managing the agency at Bear’s midtown Manhattan headquarters. He smoked his beloved Cuban cigars nearly ceaselessly; they have been like an additional digit.
He impulsively fired Warren Spector, the pinnacle of the agency’s huge mortgage enterprise, in August 2007, as a result of Spector had the temerity to be out of the workplace similtaneously Cayne the month earlier than, once they have been each competing at a nationwide bridge match in Nashville, Tennessee. “I didn’t belief him any extra,” after Nashville, Cayne advised me, and after Spector had determined to speculate one other $25m of the agency’s capital into the failing hedge funds.
Sadly, Spector took with him a wealth of data concerning the agency’s mortgage enterprise on the very second such perception was essential. Cayne didn’t strike a deal for brand new fairness for Bear Stearns throughout the summer time and fall of 2007 — he had been negotiating with Citic Securities, in China — when the brand new capital might need saved the agency from its horrible destiny.
James E Cayne, the one son of Maurice, a patent lawyer, and spouse Jean was born on February 14, 1934. He grew up within the Chicago suburb of Evanston, Illinois, and attended Purdue College however didn’t graduate as a result of he refused to retake a French class he had failed. His dad and mom have been incredulous and kicked him out of the home.
“I don’t need to learn and soak up,” he as soon as advised me. “I hear and I soak up.” He ran via a sequence of jobs — courtroom stenographer for the US army in Japan; cab driver in Chicago; and as a first-rate salesman of photocopiers, including machines and scrap steel, a enterprise owned by the household of his first spouse; and later, when he obtained to Wall Road, of municipal bonds. He aspired to be a bookie.
However his actual reward, together with blarney, was enjoying bridge, the cardboard recreation that after upon a time was how a child may get forward on Wall Road, if he had the products. And Jimmy Cayne had the products.
At Purdue, when he ought to have been learning, he performed bridge. His first marriage fell aside due to his bridge enjoying. In 1961, he and a associate gained the Midwest Regional Bridge match. He was 27 years previous. In 1964, he moved to New York Metropolis to attempt to make it as an expert bridge participant.
Enjoying bridge allowed him to satisfy many Wall Road bigwigs, together with Lawrence Wien and Larry Tisch. In 1966, he gained his first skilled match. He met his second spouse, Patricia Denner, at a bridge match. “It was love at first sight,” he advised me. He’s survived by Denner, his daughters Jennice and Alison, and 7 grandchildren.
He obtained his first job at Bear Stearns, as a municipal bond salesman, due to his bridge prowess. In 1969, Alan “Ace” Greenberg, who preceded Cayne because the agency’s chief government, fell laborious for Cayne when he discovered he was a world-class bridge participant.
How good was he? Greenberg questioned. “For those who research bridge the remainder of your life, if you happen to play with one of the best companions and also you obtain your potential, you’ll by no means play bridge like I play bridge,” Cayne advised him. Greenberg employed him on the spot.
Throughout my many hours of interviews with Cayne for what grew to become Home of Playing cards, my 2009 ebook concerning the collapse of Bear Stearns, I as soon as requested him what it felt wish to lose $1bn. In these days, that type of huge private monetary loss was uncommon. After the take care of JPMorgan was agreed, over his vociferous objections, he offered his Bear Stearns shares for round $61m.
He stated he didn’t care concerning the cash he had misplaced, boasting that he nonetheless had a fortune of greater than $400m, what with some sensible investments and the money compensation that Bear had paid him over time.
“The one individuals [who] are going to undergo are my heirs, not me,” he defined. “As a result of when you will have $1.6bn and also you lose $1bn, you’re not precisely, like, crippled, proper?
The author is writer of ‘Home of Playing cards: A Story of Hubris and Wretched Extra on Wall Road’ and a founding associate of @Pucknews