Bear Stearns and Lehman Brothers paid their executives largely in stock, and that stock lost most or all of its value when those companies collapsed.

Many people on Wall Street say these examples help make the case that pay incentives were not what caused executives at these fallen firms to take excessive risks.

But three professors at Harvard are disputing that logic in a new study, saying it is an urban myth that executives at Bear and Lehman were wiped out along with their companies.

Though the chiefs at both investment banks lost more than $900 million in their stock holdings, the professors argue that it is important to also consider all the riches the bankers took off the table in the years preceding the crisis.

At Lehman, the top five executives received cash bonuses and proceeds from stock sales totaling $1 billion between 2000 and 2008, and at Bear, the top five received more than $1.4 billion, according to the study, which was released on Sunday night on the Web site of the Program on Corporate Governance at Harvard Law School.

The payouts came in the form of cash bonuses as well as thousands of shares of stock that the executives sold as the share prices of their companies soared. Most of the executives sold far more shares during that period than the number they held when their companies hit bottom.

&S220;There&S217;s no question they would have done massively better had their firms not collapsed,&S221; said Lucian Bebchuk, one of the study&S217;s authors. &S220;But the wealth of those top executives was hardly wiped out. The idea that they were devastated financially has kind of colored the picture people have about what payoffs they were facing.&S221;

Many of the solutions that policy makers and regulators are considering for Wall Street pay are tactics that were already in place at Lehman and Bear. Both firms required executives to wait several years before selling their stock. Both firms paid heavily in stock.

Critics of compensation reform have pointed to these two firms as examples of why change in pay practices may not make a difference and have said the focus should be on things like risk management and regulatory oversight.

However, the Harvard study says the executives may have had reason to focus on the short-term prices they could attain with stock selling.

Mr. Bebchuk has been advising the Treasury Department on compensation at bailed-out companies. He advocates locking up stock compensation for longer periods as well as pay clawback provisions for years later.

James E. Cayne, the former Bear chief executive, stands out for selling fewer shares over the years than he held at the firm&S217;s demise. Mr. Cayne sold 2,720,845 shares for $289 million over eight years, beginning in 2000. He was still holding 5,685,591 shares at the start of 2008 payday loan.

The other Bear executives sold nearly five times as many shares in the years leading up to the firm&S217;s collapse as they held in 2008, and at Lehman, the executives sold about 1.3 times the shares they owned at the end.

The study does not take into account that the executives might have sold shares in part to pay hefty tax bills. Shares of stock are not taxed until they transfer in ownership to executives, which was a period of multiple years at both investment banks. At that time, some executives sold the number of shares needed to pay the tax bill on the shares they still held.

Some compensation experts said over the weekend that the study did not seem to prove that compensation caused the crisis and that it instead just pointed out that the bankers were wealthy.

&S220;I don&S217;t think anybody would question that they were well compensated,&S221; said Ren&>33; Stulz, a professor at Ohio State University who has studied bank compensation. &S220;It&S217;s certainly true that the incentive effects are different if you&S217;re already very wealthy, but that does not mean that the incentive effects are not there.&S221;

Executives at companies that were bailed out by the government have in many cases had their stock holdings recover in value in the last year, and that might have been the case at Bear or Lehman if they had received the same treatment.

Shortly after Bear collapsed, Richard S. Fuld Jr., the chief executive at Lehman, called Peter J. Solomon, an investment banker who used to work at Lehman.

&S220;He reiterated the fact that when firms like Bear Stearns fold and if Lehman Brothers got into trouble, the executives own so much stock that they were losing a lot,&S221; Mr. Solomon recalled over the weekend.

But Mr. Solomon, who has been critical of pay levels and of the fact that investment banks are publicly traded, said the executives who presided over Wall Street&S217;s collapse have suffered, despite the money they retained.

&S220;There&S217;s not one person involved in the demise of Lehman Brothers, Bear or even the troubles that have fallen on Citigroup who thinks they&S217;re living happily ever after,&S221; Mr. Solomon said, &S220;because their reputations have been tarnished, and what do you have at the end of the day but your reputation?&S221;

Through intermediaries, several of the executives examined in the study declined to comment. The other authors of the study were Alma Cohen, a professor visiting Harvard from Tel Aviv University, and Holger Spamann, a lecturer at Harvard.

Executives Kept Wealth as Firms Failed, Study Says

WASHINGTON (MarketWatch) -- After several months of improvement in housing, manufacturing and sales, the U.S. economic recovery appeared to sputter in October, leading investors and analysts to re-evaluate whether their forecasts were too rosy.

The economic data to be released in the holiday-shortened week ahead could provide a few more "what-were-we-thinking?" moments. All in all, though, the data shouldn't kill hopes for modest growth while we wait for the private sector to start hiring again.

Last week, a "reality check" rippled through the markets following weak data on housing starts and industrial production, said Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight. They expect further "mixed and somewhat ambiguous" reports in the coming week, but, on whole, they say "the evidence is still positive and continues to point to a nascent recovery" that will need "strong policy support" for some time.

MarketWatch consensus See economic calendar date report forecast previous Nov. 23 Existing-home sales 5.74 million 5.57 million Nov. 24 GDP revision 2.8%  3.5% Nov. 24 Consumer confidence 45.5 47.7 Nov. 25 Jobless claims 495,000 505,000 Nov. 25 Durable goods orders 0.5% 1.4% Nov. 25 Durables ex-transportation 0.4% 1.2% Nov. 25 Personal income 0.1% 0.0% Nov. 25 Consumer spending 0.6% -0.5% Nov. 25 New home sales 390,000 402,000 Nov. 25 Consumer sentiment 67.0 66.0 Housing

Even four years after the peak, the state of the housing market remains central to the medium-term outlook.

Construction, sales and prices picked up over recent months after hitting generational lows, boosted in part by federal policies and in part by improvement in some of the fundamentals. But the weakening in the October data ahead of the anticipated expiration of the federal home-buying subsidy has put the strength of those fundamentals to the test.

The home-buyer tax credit, of course, has now been extended and even expanded. But buyers and builders didn't know that in October.

Last week, we found out that builders cut back on permits and starts on single-family homes in October, in anticipation that the tax credit would expire on Nov. 30.

This week, we'll get October data on sales of new and existing homes.

Economists surveyed by MarketWatch expect sales of existing homes to rise about 3% to a seasonally adjusted annual rate of 5.74 million. It would be the highest sales rate since June 2007. And it would reflect some sales of buyers rushing to get in ahead of the Nov. 30 deadline. Existing-home sales are recorded at closing.

By contrast, sales of new homes are recorded when the contract is signed, which is at least a month and often much more before the sale closes. To close on a sale before Nov. 30, a buyer would have had to sign contract in September or early October at the latest.

In part because the deadline would have passed for most buyers in October, sales of new homes are projected to have declined about 3% to a seasonally adjusted annual rate of 390,000, the survey says easy payday loans. Sales of new homes have underperformed compared with existing homes, probably because buyers can get a better deal on a foreclosed home or on a home owned by someone who needs to sell, fast.

Federal policies are clearly supporting the market, but there is uncertainty about how strong it would be without the support. Economists for Barclays Capital say that sales of existing homes would have risen 10% without the tax credit, instead of the 24% that has been recorded with it.

Although home prices have fallen and mortgage rates are very low, the housing market faces considerable problems. Foreclosures continue to rise and vacancy rates are at record levels, which mean prices could fall another 5% to 10% by the middle of 2010, according to Jan Hatzius, chief economist for Goldman Sachs.

If prices, sales and construction do sag, banks are likely keep credit extremely tight, which in turn could weigh on the pace of recovery, Hatzius said.

GDP revisions

The other big story for the week could be the revision to third-quarter growth figures. Last month, the Commerce Department said real gross domestic product grew at a 3.5% annualized rate, the first gain in a year. On Tuesday, that figure is likely to be revised to about 2.8%.

The revision comes from more complete data. In the first go-around, the government statisticians must estimate many of the key inputs for September, including foreign trade, inventories and construction spending. Now that those data have been released, it's clear the first estimates were too big.

The largest source of revisions will come from nonresidential construction spending and net exports. Spending on nonresidential structures was weaker than first thought, while imports were stronger than believed, suggesting that more of the gains from increased sales in the third quarter accrued to foreign producers, rather than domestic companies. Inventories will be revised lower.

"Despite the likely downward revision, we still believe that the third quarter will prove to be the first quarter of recovery and that it demonstrates a decisive turn in the economy," wrote economists for Barclays Capital.

Economists see the economy growing at a pace just above its long-term trend. They expect GDP to grow 2.5% in the fourth quarter, 3% in the first quarter of 2010 and 3.5% in the second quarter. That's a far cry from the 6% growth seen in typical V-shaped recoveries, but it's better than a poke in the eye with a sharp stick.

Of course, those are just forecasts. No one really knows for sure how the economy will do over the next 12 to 18 months.

Economic Preview: Do weaker data show recovery is stalling?