Ex-Bear Stearns CEOs defend failing firm's conduct

WASHINGTON - James Cayne, who led Bear Stearns for 15 years, and his successor defended the conduct of the Wall Street firm against skepticism that uncontrollable outside forces were to blame for its demise two years ago.

The firm's stunning collapse in March 2008 "was due to overwhelming market forces that Bear Stearns . . . could not resist," Cayne testified yesterday before the congressionally chartered Financial Crisis Inquiry Commission.

Panel members said Bear Stearns' mounting debt and reliance on rival banks for tens of billions in loans on a daily basis must have played a role.

The panel is probing the roots of the crisis that plunged the country into the worst recession since the 1930s and brought losses of jobs and homes to millions of Americans.

The role of regulators also came under scrutiny by the panel. Lawmakers and investor advocates have criticized the Securities and Exchange Commission's oversight of Wall Street during and after the crisis.

The "Big Five" investment banks - including Bear Stearns - were in a voluntary program of supervision by the SEC established in March 2004. Former SEC Chairman Christopher Cox, who terminated the program in September 2008, testified Wednesday that it was "fundamentally flawed from the beginning."

Also appearing Wednesday was Alan Schwartz, who succeeded Cayne for a few months and negotiated with the Federal Reserve for the sale of the bank to JPMorgan Chase, with a $29-billion federal backstop. - AP