NEW YORK (Reuters) - Lehman Brothers Holdings Inc. said yesterday it demoted its chief financial officer (CFO) and chief operating officer (COO), days after the investment bank said it expected to post a $2.8 billion quarterly loss.

The replacement of Erin Callan as CFO, after only six months in the post, and Joseph Gregory as COO comes after Lehman's stock tumbled about 64 percent this year amid growing concern that Wall Street's smallest surviving major brokerage was still struggling with the credit crisis.

Lehman chief executive Richard Fuld said in a statement that replacing Mr. Gregory, a veteran of more than three decades at the company, "has been one of the most difficult decisions either of us has ever had to make."

The fourth-largest US investment bank said co-chief administrative officer Ian Lowitt, 44, will be the new CFO and Herbert (Bart) McDade, 48, global head of equities, will be chief operating officer and president.

The wider-than-expected quarterly loss and accompanying news of a $6 billion capital raising further rattled many investors' confidence in Lehman.

"Wall Street moves very quickly and certainly the shareholders were very, very disappointed with the events at Lehman," said Anton Schutz, a portfolio manager at Mendon Capital Advisors in Rochester, New York. "I think there was a need to change some of the management responsible for some of the shareholder unhappiness."

Ms Callan, who in recent months has been the public face of Lehman, is the latest in a stream of high-profile Wall Street executives who have been fired or demoted as the credit crisis widened.

The demotion of Ms Callan, who has been highly visible in recent months in defending the company from critics like hedge fund manager David Einhorn, left Wall Street with virtually no women in senior management roles.

Mr. Einhorn, whose Greenlight Capital has been shorting Lehman shares in a bet that they will fall further, declined to comment.

But it was unclear whether the high-level demotions and the raising of additional capital, completed yesterday, would be enough to allay investor concerns.

Lehman shares were down about one percent after falling as much as 11 percent in early trading, and were the weakest performers in the brokerage sector.

Some investors wondered why Mr. Fuld was not taking more of the blame for Lehman's stumbles, which for some investors have recalled Bear Stearns Cos' woes before it ultimately collapsed.

"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, Rochester, New York. "What does this say about his oversight? He's taking a hit to his credibility, and it all rolls up to him."

Still, Mr. Kaufler pointed out that unlike Bear Stearns when it was under pressure, Lehman is able to borrow at the US Federal Reserve's discount window.

Mr. McDade, the new COO, used to run Lehman's corporate bond, fixed income and equity desks. Mr. Lowitt, a Rhodes scholar, previously served as chief administrative officer of Lehman Brothers Europe.

Ms Callan, who had only been CFO since December, will remain at Lehman, rejoining its investment bank "in a senior capacity," Lehman said. The 42-year-old executive previously oversaw global hedge funds within its investment banking unit.

Mr. Gregory, 56, will remain with the company in an unspecified role, a Lehman spokesman said.