BEAR STEARN EMPLOYEES BROKEN

Bear Stearns employees wiped out
Andrew Willis, March 17, 2008 at 1:44 PM EDT

For years, Bear Stearns employees were some of the best paid individuals on Wall Street. Rivals were openly envious of the $40-million that former CEO Jimmy Cayne took home in 2006. Compensation for these executives matched that of far larger and more profitable rivals, such as Goldman Sachs. No one is envying Bear Stearns employees now. The destruction of personal wealth that just played out at the fifth largest U.S. brokerage firm is staggering. Bear Stearns current and retired employees owned a third of the brokerage house, worth $7-billion (U.S.) when shares peaked last year at $158 each.

Forbes magazine labeled Mr. Cayne the richest Wall Street CEO, with a $900-million stake in his firm anchoring a $1.3-billion fortune. Now Bear Stearns is being purchased by JP Morgan Chase for just $2 a share, or about $270-million. Mr. Cayne’s stake in the company is worth just $13-million. Investment bankers who plowed their life savings into company stock have been wiped out.And many of these Bear Stearns employees face unemployment at the same time their savings disappear.

JP Morgan will go through the 14,000 employee work force with a scythe, chopping jobs while trying to preserve a few of Bear Stearns' strong franchises, including its prime brokerage.Up and down the Street, the mood is grim. Virtually every investment bank employee, at Canadian, European and U.S. dealers, takes part of their pay in the form of shares that vest over time. Everyone has seen the value of these holdings drop sharply since the credit crunch began in August. But nowhere has the reverse of fortune been as brutal and swift as what played out at Bear Stearns.