Every time Someone Gets Fired On Wall Street, Portfolio’s Political Guy Calls For Jimmy Cayne’s Head

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Earlier this afternoon we asked if some of the guys at Bear Stearns might be smiling in the darker parts of their souls at the troubles—losses, snakepits, messes, ousting, disorganized succession plans—Merrill Lynch has been going through lately. Or, more likely, some of the guys who used to be at Bear Stearns, like former head of trading, equities, fixed income, energy and asset management Warren Spector.
We thought that maybe the guys who saw first their hedge funds and then their jobs go down the drain after a Merrill led rush of creditors started grabbing their assets—which, for all anyone knows now, might have turned out of have been worthless anyway—might be experiencing some joy at watching credit market losses take down some of the folks who took them down.
This afternoon Portfolio’s politics guy asks the same question but for a totally different reason. “If Stan O'Neal is out at Merrill, doesn't that offer some comfort to the likes of Warren Spector,” writes Matthew Cooper. “Merrill is a case of the guy at the top taking the fall. At Bear, it seemed like the number 3, Warren Spector, took the hit instead of James Cayne. Where's the fairness in that?”
We’re not sure that why exactly anyone would comforted by this. But whatever. Maybe that’s why we’re not writing about politics. But we’re not convinced that Cooper is right when he says that the “guy at the top ought to take the fall when things go so wrong.”
It’s not the first time he’s said it. Back in August Cooper wrote: “It's hard to see why the firm's chief executive, James Cayne, would summarily execute Spector but not take the rap himself. The Buck Stops Here, not there.” But we weren’t convinced that time either.
Cooper’s model is clearly a political one—although we can’t remember when the last time a top guy resigned after being disgraced by the activities of his underlings either. Well, we’ve heard about Nixon but that was a long, long time ago! And Nixon is not usually held up as a model of American leadership. So let’s say Cooper’s is a model an idealistic one that is rarely realized in reality.
It’s hard not to suspect that Cooper is trying for some sort of hobgoblinistic, liberal consistency. Liberals think Bush should step down or get impeached because of the activities of, say, Alberto Gonzalez. So that means everyone should step down when their underlings allegedly lead things off the rails.
But should Cayne go? The market, the business media and the rank-and-file if Bear is hardly clamoring for his ouster. There have been losses at Bear Stearns—and investors in those two ridiculously named funds lost buckets and buckets of money—but not on the scale of Merrill Lynch’s. And, perhaps more importantly, Cayne has left investors and employees with a feeling that he understands what went wrong and is acting to contain the damage. O’Neal failed this damage-control test, in part because he had made enough enemies who went for the kill when they scented blood. And that failure, more than anything else, appears to be what doomed him
That may not be ‘fair’ in some cosmic sense. But Wall Street is hardly a place to be if you want cosmic justice.
James Cayne v. Stan O'Neal [Capital blog, Portfolio]

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