Question: what's the best way to shake up senior management without anyone noticing? Answer: when you announce said changes right after a historic government takeover of Fannie Mae (FNM) and Freddie Mac (FRE). Lehman Brothers Holdings Inc. (LEH) did just that on Sunday night, announcing that it had replaced its fixed income chief and saying that its chief executive officer for Europe, the Middle East and Asia-Pacific would retire. The Wall Street firm said that Jeremy M. Isaacs, who since 2000 had served as chief executive officer for Europe, the Middle East and Asia-Pacific would retire; no reasons were provided. According to a press statement, Riccardo Banchetti and Christian Meissner have been appointed as his joint replacements; both are company insiders. Andrew Morton, global head of fixed income, didn't last very long with the firm; appointed to his post in February, Lehman said that both he and Benoit Savoret, chief operating officer of Europe and the Middle East since May 2007, "have decided to leave the firm to pursue other interests." The shake-up comes as Lehman is rumored to be in discussion with potential investors to create a "bad bank" to hold $32 billion of the firm’s commercial mortgage interests; the firm is also rumored to be readying to announce 1,000 to 1,500 layoffs this coming week. Lehman has already laid off roughly 6,000 workers since June 2007, and was the leading underwriter of mortgage-backed securities last year. Not surprisingly, the firm has been the subject of plenty of speculation over its Q3 results, and has been an on-again, off-again target for speculation over a potential to be "the next Bear Stearns." A team of analysts at JP Morgan Chase & Co. (JPM) has estimated that Lehman could face up to $4 billion in write downs when it reports Q3 earnings. Lehman absorbed $2.4 billion in write-downs to its residential mortgage-related positions in Q2; the firm reduced its residential mortgage exposure from $31.8 billion to $24.9 billion during the quarter. MBS and ABS assets remain dominant on Lehman’s overall book, as well, valued at $72.5 billion of the company’s $248.7 billion in total assets at the end of May; the second-largest asset category is the firm’s corporate debt, by comparison, which represents $50 billion. Disclosure: The author was long FRE when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.