Reached by phone at his residence in Manhattan, Mr Cayne declined to comment.

'I can't talk. I'm on the other line,' he said.

The 74-year-old Mr Cayne has been under fire since two Bear-run hedge funds collapsed last summer. The fifth-largest US investment bank also lost money in the fourth quarter - its first loss ever - on bad bets on risky subprime mortgages.

Mr Cayne has been the subject of unflattering articles about his time playing golf and bridge while the company's key fixed-income business stumbled amid a meltdown in the subprime mortgage industry. The company took a US$1.9 billion (S$2.7 billion) write-down in the quarter that ended Nov. 30, reflecting the reduced value of subprime mortgage-related securities. Its quarterly net loss was US$854 million.

Bear Stearns is expected to name President Alan Schwartz, a 57-year-old investment banker, as the company's new CEO, the Journal said.

Mr Schwartz has been viewed as the likely successor to Cayne since the departure of Warren Spector, who was among those blamed for the collapse of the two hedge funds. At the time, he was co-president with Mr Schwartz.

Mr Cayne began telling board members on Sunday he would step down as CEO but remain chairman, the Journal reported.

Punk Ziegel & Co analyst Richard Bove said a change in leadership is necessary.

'Bear Stearns needs to dramatically adjust its operations,' Mr Bove said. 'The company is clearly in trouble for a variety of reasons. Its core businesses are all shrinking and the company is losing market share.'

Mr Bove said Mr Schwartz is very capable of bringing the company back together.

'He would be my pick to run Bear Stearns,' he added.

Bear Stearns shares have dropped 52 per cent over the past year. -- REUTERS