Bear Stearns seeks Wall St backing

Bear Stearns seeks Wall St backing

http://www.ft.com/cms/s/d0dc876c-444b-11dc-90ca-0000779fd2ac.html

By David Wighton in New York

Published: August 6 2007 19:53 | Last updated: August 6 2007 21:34

Jimmy Cayne, chief executive of Bear Stearns, has been calling round other Wall Street chiefs asking them not to pull business as he faces a growing crisis of confidence in the bank.

Mr Cayne called Stan O’Neal, chief executive of Merrill Lynch, on Friday to reassure him about Bear Stearns’s financial health and is reportedly asking for a meeting with Chuck Prince, chief executive of Citigroup.

Bear Stearns has also received calls from concerned counterparties seeking reassurance.

Its shares fell sharply early on Monday following Sunday’s ousting of Warren Spector, co-president, although they later rallied strongly.

The head of risk at a leading Wall Street bank said Bear Stearns’s financial position appeared sound but that it was facing a crisis of confidence that was “potentially very dangerous”.

On Friday, Bear Stearns held a conference call designed to calm concerns but comments by Sam Molinaro, chief financial officer, had the opposite effect. He said that credit market conditions were as bad as he had seen in 22 years.

Bear Stearns’ shares briefly fell below $100 in morning trading in New York, a drop of 8 per cent, but ended more than 4 per cent up.

The turmoil in the US mortgage market claimed another victim on Monday when American Home Mortgage Investment, one of the top 10 home lenders in the US, filed for bankruptcy protection.

Meanwhile, buy-out groups and other risky borrowers could see a sharp rise in funding costs in the coming months following an unprecedented swing in the price at which risky corporate loans are trading in US and European markets.

According to Standard & Poor’s Leveraged Commentary Data, an industry newsletter, the price of these loans has slumped dramatically this month.