Bear Stearns co-president forced out

NEW YORK -- Alan Schwartz, Bear Stearns' other co-president and co-COO, will become sole president effective immediately, and Samuel Molinaro Jr. will be chief operating officer in addition to his current duties as chief financial officer, the firm said in a statement Sunday.

Jeffrey Mayer, co-head of the fixed income division, will take Spector's seat on Bear Stearns' executive committee, the firm said.

"In light of the recent events concerning (Bear Stearns Asset Management's) High Grade and Enhanced Leverage funds, we have determined to make changes in our leadership structure," Chairman and Chief Executive James Cayne said. "I have every confidence in this team to continue Bear Stearns' 84-year legacy of success and profitable growth."

Spector, 49, had spent his entire career at Bear Stearns since joining the firm as a trader in 1983 and had been considered a likely successor to Cayne, 73.

But the collapse of the two hedge funds in the asset management unit that Spector oversaw put him and the firm under pressure. The funds filed for bankruptcy protection Tuesday, two weeks after the company told investors that one with assets of about $638 million was essentially worthless, and another worth about $925 million before taking on losses in March had lost more than 90% of its value.

Both funds were squeezed after Bear Stearns made wrong-way bets on the home mortgage market and was caught as loans to subprime borrowers began to default. Bonds backed by home loans and other similar investments have lost value amid rising homeowner defaults as the housing market enters its third year of decline.

As reports became public that Cayne had asked for Spector's resignation, Standard & Poors said Friday that it was considering cutting Bear Stearns' credit rating because of the firm's exposure to the distressed mortgage and corporate buyout markets.