Bear Stearns has ousted its president and co-chief operating officer, Warren Spector, amid turmoil in its credit business and a steep slide in its stock price.

Alan Schwartz has been named the firm's sole president. The shakeup comes after two Bear Stearns hedge funds that had invested heavily in securities tied to subprime mortgages blew up and a third fund ran into trouble. On Friday, Standard & Poor's lowered its outlook for Bear Stearns to "negative" and Bear's stock tumbled.

While Spector becomes the fall guy for the credit crisis, his exit raises questions about the direction of the firm.

Spector had been the top lieutenant of the chief executive, James Cayne. With Spector's departure, there is no obvious successor to the 73-year-old Cayne. Schwartz is an investment banker and is unlikely to head a firm dominated by fixed-income trading.

And while Cayne cited "the depth of talent in our senior management team" in announcing the shakeup, he and other executives are likely to come under continued fire.

"The fact that this thing got away from them raises questions about controls and oversight of the firm," Richard Bove, an analyst with Punk, Ziegel & Co., told Bloomberg News. "The top management at Bear hasn't really changed for a decade, and these guys have gotten comfortable in their positions."

Reports that Cayne golfed and played in a bridge tournament during the credit crisis have not helped instill confidence in investors.

A possible takeover of Bear has been a talking point on Wall Street for years, and the big drop in its stock price means that the firm is trading relatively cheaply compared with its peers.

Yet Felix Salmon and other commentators have noted that the hurdles to a sale remain high.

A more likely outcome is that Bear will find a strategic investor to take a big minority stake. The Wall Street Journal reports that Bear Stearns' vice chairman, Donald Tang, has discussed a possible investment by entities in China, such as Citic Group. Chinese investors have recently taken big stakes in the Blackstone Group and Barclays.