Bear Stearns (BSC) May Fire President, But Problems Could Grow

The Wall Street Journal reports that Bear Stearns is about to fire its co-president who is also head of its trading operations. He will be the highest-level person at the company to take the fall for the collapse of two hedge funds operated by the company and substantial trouble at a third.

BSC shares have gone from $169 in February to $108 yesterday. And, that fall could continue. Firing management is rarely a sign that a company’s troubles are behind it.

Bear Stearns is still trying to run ahead of a wave that could overcome it. According to The Wall Street Journal: "In addition to detailing the steps it has been taking to raise cash, Bear said it has reduced its reliance on short-term loans so it isn’t vulnerable to being shut off from the day-to-day loans required to fund its trading operations."

It is still unclear whether BSC has balance sheet problems or has invested in other instruments which have lost a great deal of value over that last few weeks.

If the collapse in the mortgage markets and buy-out debt continue, beating on a near-term recover at the investment banking firm would be a mistake.

Douglas A. McIntyre