Bear Stearns Cos on Friday replaced the head of its asset management business after two of the investment bank's hedge funds hit rock bottom by making bad bets on risky mortgages. The meltdown of the hedge funds embarrassed Bear Stearns, widely known for its savvy in handling mortgage risk. The funds buckled on wrong-way bets tied to subprime loans, which are made to people with weak credit.

Jeffrey B. Lane, a veteran senior executive at Lehman Brothers Holdings Inc. and Neuberger Berman Inc., replaces Richard Marin as chairman and chief executive of Bear Stearns Asset Management. Marin will remain as a senior adviser to Lane, the company said.

Bear Stearns Chairman James Cayne said in a statement that the company's focus is restoring investor confidence in its asset management business.

In a press release, Bear Stearns did not address the status of Ralph Cioffi, who managed the two troubled hedge funds. Bear Stearns did not return a telephone call seeking comment.

When asked earlier this week if the jobs of Marin and Cioffi were safe, a Bear Stearns spokesman said they were. Bear Stearns said it would bail out only one of two struggling hedge funds, providing US$1.6 billion of financing to save its High-Grade Structured Credit Strategies Fund. The other fund, which carried more leverage, has about US$1.2 billion in debt that's being worked out.