Another Victim of the Bear Collapse: Jimmy Cayne's Family Foundation

Typical of other Wall St. investment banks, Bear Stearns prided itself on its philanthropic "guiding principle."

But it was the only firm to mandate charitable giving. Since the late 1970's, senior managing directors at Bear Stearns have had to donate four percent of their annual pay including bonuses. In 2006, the last year with available data, Bear had about 1,050 senior managing directors who gave away over $45 million.

Interestingly, if these directors just met the 4 percent requirement, then they seem to have been less charitable than others in their income bracket, according to this November story by the New York Times' Louise Story.

At the top of the Bear food chain, until this January, former C.E.O. and current chairman Jimmy Cayne set up a family foundation to direct some of this giving. In 2007, the foundation gave away about $2.6 million including $453,000 to the UJA Federation of New York and $300,000 to the Jewish Federation of Monmouth County.

But the chance that these charities will receive more similarly-sized gifts from Cayne now seems low. The reason? The only asset the foundation had was Bear Stearns stock.

The fair market value of the foundation's assets was $30.6 million ~~at the end of 2007~~ as of May 2007. Based on the 96 percent fall in Bear's stock price since then, the foundation may now have just ~~$2 million~~ $1.2 million if he didn't sell any stock since then. (Cayne did not return my calls. Since 1998, the only asset the foundation has held is Bear stock.)

Could Cayne's apparent losses have been avoided? Absolutely.

In fact, instead of spending all that time playing bridge, Cayne might have benefited from picking the brain of Alan Schwartz, his successor as C.E.O. at Bear Stearns.

Schwartz also has a family foundation, which according to the latest available I.R.S. filing, had an asset base of $21 million in 2006. That year Schwartz donated $10 million in Bear Stearns stock to the foundation, but as most investment advisors to charitable organizations would, umm...advise, the stocks were sold off within a week for much safer securities like Treasury notes and corporate bonds.

The web site for the American Contract Bridge League has this quote from fellow bridge enthusiast, Berkshire Hathaway's Warren Buffett:

Bridge is a great way to learn from inferences. A lot of decisions in life are made by inferring from what you know.

Is there anything we can infer about Cayne's managerial abilities in his last year at Bear?

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