Bear Stearns’ bridge-playing CEO saw rise, fall

James Cayne, the cigar-puffing college dropout who parlayed a stint as a professional bridge player into a job as a bond broker on Wall Street, where he led Bear Stearns Cos. to record profits, then to the brink of collapse, has died. He was 87.

He died on Tuesday, the Wall Street Journal reported, citing his daughter, Alison Cayne.

Until 2007, Cayne, known as Jimmy, was one of Wall Street’s brightest stars. Bear Stearns, the fifth-biggest U.S. securities firm by market value, had seen its profit surge 40 percent in fiscal 2006 to an all-time high of $2.1 billion, and Cayne — the longestserving chief executive officer on Wall Street — had received $40 million in compensation.

By the end of 2007, Bear Stearns was staggering from losses in the U.S. subprime mortgage market and shareholders were pressuring Cayne to step down. The firm reported an $854 million fourth-quarter loss that year, the first quarterly deficit in its history.

On Jan. 8, 2008, Cayne ceded the CEO role to Alan Schwartz, a 30-year veteran at the firm, and stayed on as chairman. Two months later, the 85-year-old firm, on the brink of bankruptcy, was sold to Jpmorgan Chase & Co. for $10 a share. The stock had traded at about $170 in January 2007.

Playing cards

The demise of Bear Stearns took a toll on Cayne’s image and legacy. His predecessor and mentor, Alan “Ace” Greenberg, blamed him for the firm’s collapse, describing Cayne as a “demagogue” and a megalomaniac more interested in playing bridge than in running the firm. Greenberg died in July 2014.

“The way he conducted himself during the crisis? Just horrible,” Greenberg said in 2011. “He didn’t study the books, didn’t know what we owned, didn’t call people in and ask.”

The disrespect was mutual: There “isn’t anybody that will tell you he’s an honest guy,” Cayne said of Greenberg, according to William Cohan’s 2009 book “House of Cards.”

Funds collapse

The crisis began in mid-2007 with the collapse of two Bear Stearns hedge funds that invested in securities tied to mortgages. The funds’ meltdown triggered re-pricing of mortgagerelated securities that produced more than $1.7 trillion of losses at banks worldwide, according to data compiled by Bloomberg.

Throughout July 2007 — as the two hedge funds were careening toward collapse — Cayne spent 10 of the month’s 21 workdays out of the office, mostly on a golf course or playing bridge, the Wall Street Journal reported. When the firm ran out of money in March 2008 and faced a bank run from its hedge-fund clients and short-term creditors, Cayne, still the firm’s chairman, was at a bridge tournament in Detroit.

Midwest roots

Cayne was born Feb. 14, 1934, in Evanston, Ill., the only child of a patent lawyer, Maurice Cayne, and his wife, Jean, according to Cohan’s book. He studied engineering at Purdue University in West Lafayette, Ind., intending to follow in his father’s footsteps.

He dropped out after three and a half years when he learned he would have to stay another year to retake a French class he had failed. After serving in the Army, he worked as a taxi driver in Chicago.

In 1964, he moved to New York City to try his hand at the professional bridge circuit, finding some success but not enough to see a path to wealth. He landed a sales job at the municipalbond brokerage Lebenthal & Co.

In 1969, seeking a new job opportunity on Wall Street, Cayne attracted the notice of Greenberg, the Bear Stearns boss who shared his passion for bridge.

In 1985 Cayne became president of Bear Stearns, the No. 2 job. He added the title of CEO in 1993 but didn’t ascend to the top position until Greenberg relinquished the title of chairman in 2001.

Cayne didn’t abandon card games when he became an executive. In 1992, when he opened the firm’s Beijing office, he played bridge with top Chinese government officials. As late as 2002, he was listed in bridge teams representing the U.S. in international tournaments.

With a card-player’s instincts, Cayne avoided risky bets and throwing good money after bad. Such was the case with Longterm Capital Management, a hedge fund that almost collapsed in 1998 when it lost about $4 billion. Bear Stearns had handled and processed the firm’s trades, and Cayne personally had invested $10 million.