JPMorgan to Buy Bear for $2 a Share

A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail," drawing the ire of its brethren on Wall Street. On Friday, it found itself hat in hand, looking for the same kind of aid.

It was a stunning collapse for Bear Stearns, founded in 1923 and best known in recent years for its success in the once-lucrative mortgage securities market. Its aggressive position in mortgages was also its undoing.

In June, two Bear-managed hedge funds worth billions of dollars collapsed and lost all their money. The funds were heavily invested in securities backed by subprime mortgages loans given to customers with poor credit history. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.

The funds' collapse and subsequent problems in the credit markets called into question Bear Stearns ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve Bank-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."

Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.

The company was opened in 1923 as an equity trading shop. Today, it has subsidiaries providing a wide array of financial services products for individuals, corporations, institutions and governments. Generally, it provides capital markets, wealth management and global clearing services to its customers.

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AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.