Analysts and former colleagues welcomed the appointment of Alan Schwartz, who was confirmed as the replacement for James Cayne as Bear Stearns’s chief executive last night.

Mr Cayne, 74, will step down as chief executive after the Wall Street firm took substantial writedowns on its portfolio of investments in high-risk sub-prime mortgages and closed two loss-making hedge funds. He will retain the position of chairman.

Mr Schwartz, Bear Stearns’s 57-year-old president and chief operating officer, has accepted the chief executive role and his appointment has been welcomed by Wall Street.

Chris Whalen, managing director of Institutional Risk Analytics, a consultancy that assesses risk in the financial services industry, said: “He is one of the most impressive investment bankers I have ever known and has been groomed for this challenge all his life. He has worked in a broad range of areas, including high-yield bonds.”Mr Whalen worked in mergers and acquisitions at Bear Stearns with Mr Schwartz.

Richard Bove, an analyst at Punk Ziegel & Co, said: “He’s brilliant. He has tremendous raw intellect, is incredibly dedicated and has a strong personality.”

He added that Mr Schwartz is unlikely to change his mind once it is made up, which “is either good or bad depending on whether it is a good decision, but with him it usually is”.

Mr Schwartz, who was born in Brooklyn, began his career selling analysts’ research to institutions at Wertheim Schroder, a unit of Schroders that is now owned by Citigroup.

In 1976, he moved to Bear Stearns to head its institutional equity sales division in Dallas, Texas, before becoming head of the group’s corporate finance division, overseeing mergers and acquisitions, company flotations and debt offerings.

He became the sole president and Bear Stearns’s No 2 last year after the removal of Warren Spector as joint president.

Mr Cayne’s departure had been widely expected as Bear Stearns’s home loan-related losses cut its share price in half last year and Wall Street’s former mortgage bond king lost its crown.

His position was further dented as reports questioned his dedication to the firm he ran. Last summer, as two hedge funds run by the bank were collapsing under the weight of failed sub-prime investments, Mr Cayne spent several days away from the office playing golf. On another occasion, he attended a ten-day bridge tournament in Nashville.

Bear Stearns confirmed the news last night.

Mr Cayne’s resignation as chief executive will be the fourth among the leading banks as the sub-prime crisis spreads across the financial services industry. Peter Wuffli, the head of UBS, was the first to go. He was followed by Stan O’Neal, of Merrill Lynch, and Chuck Prince, at Citigroup.

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