From the Los Angeles Times

Bear Stearns chairman sells shares

March 28, 2008

Bear Stearns chairman sells shares

James "Jimmy" Cayne, chairman of Bear Stearns Cos., sold his shares in the crippled securities firm for $61 million this week, before a vote on the company's pending takeover by JPMorgan Chase & Co.

Cayne sold 5.66 million shares at $10.84 apiece Tuesday, according to a regulatory filing. His stake's value had plunged from almost $1 billion last year, when the shares peaked at $171.50 before the sub-prime meltdown toppled two of the firm's hedge funds and prompted a contraction in credit markets worldwide.

Cayne, 74, led Bear Stearns as chief executive for 15 years until January, when he stepped down after the New York-based firm posted its first loss. The company was forced to seek funding from the Federal Reserve and then submit to a takeover by JPMorgan after a run on the securities firm drained cash reserves.

Under JPMorgan's offer, which it sweetened Monday, Bear Stearns shareholders will get JPMorgan stock that was valued at $10 per Bear Stearns share based on JPMorgan's closing price Friday. The deal now is worth $9.32 a share based on Thursday's close.

Meanwhile, Bear Stearns broker Douglas Sharon, who agreed to join Morgan Stanley's Boston office, was temporarily barred from working there by a federal judge Thursday.

Funds may create a bond insurer

California Treasurer Bill Lockyer is exploring the possibility of having the state's giant pension funds create a bond insurer.

In the meantime, Lockyer has no immediate plans to use Berkshire Hathaway's new bond insurance unit after the head of the unit defended using different rating scales for municipal and corporate issuers, Tom Dresslar, a spokesman for Lockyer, said Thursday.

The treasurer has been pressing rating firms to grade municipal bonds on the same scale used for corporate debt. That would make it easier for state and local governments to issue top-rated bonds, reducing or eliminating the need for bond insurance to attract investors.

The troubles of bond insurers in recent months -- tied to their move into insuring mortgage-backed securities -- have thrown the muni market into turmoil, pushing up yields.

Berkshire, run by billionaire investor Warren E. Buffett, entered the municipal bond insurance industry this year in a bid to take advantage of the incumbent insurers' troubles.

A Berkshire spokesman declined to comment Thursday.

Also Thursday, California's insurance commissioner, Steve Poizner, said he approved Berkshire's new bond insurer in a swifter-than-usual fashion, citing a lack of such providers.

Dresslar said Lockyer had spoken with the California Public Employees' Retirement System, the country's biggest pension fund, about creating a bond insurer. He also intends to pursue the plan with the California State Teachers' Retirement System.

Lockyer is a board member of both pension funds.

Standard & Poor's has defended its method for rating munis. Moody's Investors Service and Fitch Ratings have moved to address issuers' complaints.

From Times Wire Services