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Thursday, July 31, 2008
Former Bear Stearns CEO Schwartz to Leave JPMorgan Chase
Ken Sweet
FOXBusiness
Former Bear Stearns Chief Executive Alan Schwartz will leave JPMorgan Chase on Aug. 31, sources inside the firm told FOX Business.
This marks the departure of the top official at the collapsed investment bank who helped navigate Bear Stearns into the arms of JPMorgan Chase (JPM) during that infamous week in March.
Sources said Schwartz’s resignation was voluntary and the action was “amicable” between Schwartz and current JPMorgan Chase CEO Jaime Dimon.
The announcement was sent to employees this morning in a note signed by Dimon and the JPMorgan’s head of investment banking.
"With most of the work on the merger integration behind us, Alan will be moving on from the firm at the end of August to pursue other interests,” the memo said. "Despite the extremely difficult circumstances that brought our firms together, Alan has been a terrific and constructive partner through the process."
Sources said Schwartz will most likely move on to other opportunities possibly a competitor or a private equity firm.
Alan Schwartz took over the reigns of Bear Stearns in early January after long-time CEO Jimmy Cayne resigned under pressure from investors. Schwartz attempted to restore Bear Stearns’ balance sheet during the first three months of the year, but was unsuccessful and firm collapsed on rumors that the firm was facing a liquidity crisis.
JPMorgan then bought Bear Stearns for $1.1 billion, or $10 a share in March. Bear Stearns stock had traded for as much as $150 a share a year earlier and has come to represent the single-largest victim of the 2007 subprime mortgage mess and the ongoing credit crunch.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
