What's he smoking?

20 December 2007 By Richard Beales Follow @richardbeales1

On the one hand, Bear Stearns needs to expand and invest in people. On the other, its first ever quarterly loss has undermined the firm s finances and reputation. Septuagenarian boss Jimmy Cayne, himself under scrutiny, faces long odds in engineering a rebound for the firm.

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Bear Stearns on December 20 reported a net loss for its fourth quarter to November of $854m, its first quarterly loss in its 84 year history. The mortgage securitization leader took $1.9bn of writedowns on inventory including subprime mortgagebacked securities and collateralised debt obligations.

For the year, Bear made a profit of $233m, an 89% decline from 2006. The profit represented a 1.8% return on equity.

Chief executive Jimmy Cayne and other executive committee members will not receive bonuses this year, largely because performance was too poor to trigger any under the firm's compensation programmes.

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