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 at Monmouth Medical Center in Long Branch, New Jersey, days after suffering a stroke, said his wife, Pat.
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% in fiscal 2006 to an all-time high of $2.1 billion, and Cayne — the longest-serving 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 Bridge
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 of Cayne in an interview with Bloomberg BusinessWeek 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 mortgage-related 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.
In an interview, Pat Cayne insisted Bear Stearns had kept her husband in the dark about its worsening finances during the final months of 2007. "He had no clue," she said.
In 2010, Cayne told the Financial Crisis Inquiry Commission that the market's "unjustified and irrational" loss of confidence in Bear Stearns had become "a self-fulfilling prophecy." Still, when asked by the panel if he had made mistakes, he said: "I take responsibility for what happened. I'm not going to walk away from the responsibility."
His own wealth was not spared. By the time he sold his 5.66 million Bear Stearns shares, in March 2008, they were worth $61 million — down from almost $1 billion a year earlier. He dropped off Forbes magazine's annual lists of the world's richest people, his net worth having peaked at an estimated $1.3 billion in 2007.
Midwest Roots
Cayne was born Feb. 14, 1934, in Evanston, Illinois, 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, Indiana, 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.
