Facing First Loss, Lehman Demotes 2

NEW YORK -- Lehman Brothers has demoted its chief financial officer and chief operating officer after announcing it expected its first-ever loss as a public company and following a 65 percent slide in its shares this year.

The replacement late last week of Erin Callan as CFO, after only six months in the post, and Joseph Gregory as COO, triggered further speculation about whether Lehman could continue to exist as an independent entity given the size of recent write-downs and pressure on investment banks to reduce risk.

The shakeup at Wall Street's smallest surviving major investment bank also raised questions about whether CEO Richard Fuld could survive investors' dismay over a wider-than-expected quarterly loss and accompanying news of a move to raise $6 billion.

"I think there's just a fear that the problems at Lehman are deeper than what Fuld thought," said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management.