Issue date: 4/1/08 Section: Campus

Academics like Bienen are brought in to help corporate boards look "independent" and "as democratic and diversified as possible," said Jed Horowitz, the Newswires reporter who first reported Bienen's departure from the board. But, Horowitz said, the board at Bear Stearns "is one of the oldest, all-white, all-male boards in the country."

Despite extensive corporate reforms enacted by the government after the scandal involving energy company Enron, Horowitz said the selection of board members nationwide "is still perceived as 'cronyistic.'"

The Board of Directors at Bear Stearns has come under fire in the last year for its management of the company.

Subprime borrowers usually have low credit scores and are therefore viewed by lenders as clients with higher risk, according to National Public Radio. The majority of subprime borrowers receive adjustable-rate mortgages, which have an interest rate that increases after an introductory period at the start of the mortgage.

With a downturn in the national real estate market, more people with subprime loans are missing payments or defaulting on their mortgages. That trend has hurt firms with investments backed by subprime mortgages, including Bear Stearns.

The bankruptcy of two large hedge funds controlled by Bear Stearns in August 2007 was followed by the first quarterly loss in the bank's 85-year history, reported in December 2007. In January, CEO James Cayne resigned from the company.

JPMorgan agreed to purchase Bear Stearns as the bank neared collapse. The Federal Reserve oversaw talks between both companies and agreed to guarantee up to $30 billion of Bear Stearns' assets to assuage investors, according to The New York Times.

"I think every member of that board should be embarrassed," Horowitz said. "The place imploded."

Though Bienen declined to comment on his departure from Bear Stearns, his reasons for leaving are open to interpretation, Horowitz said.

"I wonder if he was frustrated with the way the firm was being run … or if he was getting out while the getting was good," he said.

Even though Bienen is leaving, he may still be held responsible in potential lawsuits brought by investors, Minow said.

"He will have to answer a lot of questions about the steps the Audit Committee followed," she said. "Who they talked to, what questions they asked, what numbers they looked at; in other words, the process that they took."



k-berlin@northwestern.edu

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