Bear Stearns replaces funds boss

Bear Stearns is the fifth-largest bank in the US

US bank Bear Stearns, which had to bail out two hedge funds with $1.6bn (£800m), has hired a new head of asset management to find out what went wrong.

Bear Stearns has brought over Jeffrey Lane from rival banking group Lehman Brothers to help repair its business. Mr Lane will replace Richard Marin.

The bank had to bail out its funds after they made bad bets on securities that were backed by sub-prime loans.

Defaults on the loans, for people with poor credit histories, have increased.

Checking out

"We've obviously had a major hiccup that we're all embarrassed about," Mr Lane said in an interview with Reuters.

He explained that he was "here not to unwind the business, but to grow it".

And he added that the current problems at Bear Stearns "ain't gonna happen again".

Despite the reassurances, Bear Stearns' shares dropped 2.8% on concerns that the problems would hurt its profits and mortgage business.

The shares were also dented by speculation that US regulators were making informal inquiries about the hedge funds.

However, the US Securities and Exchange Commission declined to comment on the rumours.

Sub-prime mortgages are high interest housing loans given to people on low incomes or with a poor credit rating.

As the US housing market has faltered, home repossessions have surged, and an increasing number of sub-prime borrowers have defaulted.