How Jimmy Cayne Can Survive the WSJ Attack

The WSJ is splashing Kate Kelly’s story about Jimmy

Cayne’s part-time leadership of Bear Stearns this summer all over the front

page of its newspaper and website. There’s a full spectrum of reactions, ranging

from the hoped-for push towards Cayne’s ouster all the way to spirited attacks

on Kelly.

Jeffrey Cane (no relation) calls the piece "devastating" and wonders

whether Cayne is next

to be ousted:

Cayne was seen as buying time with a recent deal with Citic Securities of

China. The clock has now resumed ticking.

The NYT calls Kelly’s piece "long, unflattering and at times highly gossipy,"

and wonders whether the ousted Warren Spector was a key source; its headline

is "The

Jimmy Cayne Takedown".

Helen Thomas is surprised that Kelly printed the

marijuana allegations:

Yes, you read that correctly. The WSJ is accusing the Wall St heavyweight

of being a pothead. Mr Cayne denied a specific instance cited by the Journal,

where he is said to have invited a fellow player and a woman to smoke pot

with him, in Memphis, in 2004.”Asked if more generally if he smoked

pot, Mr Cayne said he would respond only ‘to a specific allegation,’

not to general questions,” the story adds.

The WSJ seems rather relaxed about this. The implication is that if Mr Cayne

had been sparking up on Wall Street while elbow deep in hedge fund mess, rather

than as part of bridge-related R&R then all would have been fine. It’s

the hand-off approach they’re bothered about.

Doug McIntyre is more


The WSJ wants to make a virtue out of playing detective, which is fine, but

whether it helps shareholders in Bear Stearns is another question.

CEOs of large companies often leave the management of problems in the hands

of other senior executives. There is too much activity and too many problems

to go around for one person to spend close to full-time on any one.

And Yves Smith really hates the entire story, which he calls a "hatchet

job" which is "wrapped in the veneer of balanced reporting":

The timing of the article stinks to high heaven. There is no crisis looming

at Bear right now; in fact, it pulled off what many, yours truly included,

thought would not be possible: it not only secured an investor, the Chinese

state sponsored bank, Citic, but the terms also appear very favorable to Bear…

Is Cayne guilty of dereliction of duty? The test is whether his absences were

detrimental, and it is hard, and also too early, to tell.

My feeling is that there is too little in the way of named sources in the story

and too much in the way of obvious axe-grinding, and that the natural reaction

within Bear Stears and on its board will be to rally round Cayne rather than

to oust him. If the story turns out to have legs, then that will change. But

already most of the coverage seems to be concentrating as much on the journalism

as it is on the allegations therein. If that becomes the generally-accepted

take, then Cayne should be safe for the time being.

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