Bear Stearns Cos.’ James “Jimmy” Cayne handed over the chief executive officer role to his hand-picked successor, staying on as chairman as the firm tries to recover from the collapse of the subprime mortgage market.

Alan Schwartz, the securities firm’s 57-year-old president, will take over as CEO, New York-based Bear Stearns said in a statement yesterday.

Mr. Cayne, 73, the longest-serving chief executive on Wall Street, joins the former CEO of Citigroup Inc., Charles Prince, and Merrill Lynch & Co.’s Stan O’Neal, who left as the slump in mortgage-related securities eroded earnings. Bear Stearns’s fourth-quarter loss of $854 million was the first in its history and the company’s market value plummeted 57% in New York trading during the past year, more than any rival firm.

“This is quite a radical change for Bear,” an analyst at Sanford C. Bernstein & Co. in New York, Brad Hintz, said. “This is a company which has had only two chairmen/ CEOs in the last 18 years.”

Bear Stearns, the fifth-biggest U.S. securities firm by market value, fell $5.08, or 6.7%, to $71.17 in composite trading on the New York Stock Exchange at 4 p.m.

Mr. Schwartz “was a natural choice” to become the next CEO, a Bear Stearns board member, Henry Bienen, said yesterday in an interview. “He’s a very experienced guy and obviously respected by the board.”

A Brooklyn native and 1972 graduate of Duke University in Durham, N.C., Mr. Schwartz was drafted as a pitcher by the Cincinnati Reds baseball club but injured his elbow and never reported to the team. He started at Bear Stearns’s Dallas office in 1976 as an institutional stock salesman. Alan “Ace” Greenberg, who became Bear Stearns CEO in 1978, took notice after Mr. Schwartz called him with ideas for improving the stock-research department. Mr. Schwartz moved to New York and in 1979 became head of research and investment strategy.