Greed and Glory on Wall Street
Auletta, Ken
GREED AND GLORY ON WALL STREET: THE FALL OF THE HOUSE OF LEHMAN Ken Auletta/Random House/$19.95 George Sim Johnston The publication last spring of Ken Auletta's account of the fall of Lehman...
...The federal government began to run up huge deficits, and the resulting flood of Treasury debt, swelled by state and local bond issues, made the trading rooms of various firms much more profitable At the same time, with inflation gathering force, the capital markets became more volatile (the price of a bond might change as much in a day as it once did in a year), and so the potential for trading profits became even greater...
...ING i-the-I Valerie P. Hans and Neil Vidmar Foreword by Hans Zeisel Are juries competent to evaluate increasingly complex laws...
...When most of us think about Victorian morality, adjectives like "conventional," "proper," "complacent," "hypocritical," and "prudish" immediately spring to mind...
...The Goldwater family left Poland for London, London for California, and ultimately, California for Arizona...
...This manuscript was first discovered by John M. Lothian of the University of Aberdeen in 1958...
...In this book, the author examines the family that shaped the Senator's perspective and provided him with his philosophical foundation...
...They retire early because the stress level in the business is up there with the control tower at LaGuardia airport...
...Auletta's account, as I say, reads like a good novel...
...The "golden parachute" is one item of compensation where in-vestment banks have not caught up with corporations like Revlon, which paid its CEO $32 million to take a walk after being taken over...
...Syndicate desks, where new issues are priced, were an exception, since they are quasi-Corporate Finance) But several things happened to change the social balance on Wall Street...
...And that individuals who rise to the top of their calling may well remain emotionally glued in adolescence...
...it was "a culture living on sheer nerve and will, the nerve to know the worst and to will the best...
...Peter-son wandered back downstairs and said, "I didn't see anyone up there except a guy with two oxygen tubes, a cigar and a martini...
...She is also correct, however, in pointing out that it was "too impoverished, too far removed from its original inspiration, to transmit itself to the next generation...
...These pieces of paper are used by their superiors either for making decisions or for giving the client the impression that much effort has gone into making a decision...
...Oh, there were still plenty of differences, especially in dress code (in no city state/zip PLENUM PUBLISHING CORPORATION 233 Spring Street, New York, N.Y...
...Finally, in 1973, with the firm hemorrhaging badly, the partnership turned to Peter Peterson, who had been a boy wonder at Bell & Howell (which loomed larger on the corporate landscape twenty years ago) and Secretary of Commerce under Nixon, to impose order...
...Investment banks are inherently volatile anyway, since crack bankers are more interested in doing deals than in managing...
...The article happened to be among the weekend reading of an executive at rival Shearson/ American Express, who immediately recognized a potential bargain acquisition...
...must reading...
...Superannuatedbankers often take their money and settle into that wonderfully vague activity known as "consulting...
...Even liberal arts majors entering Harvard Business School have only the foggiest notion of what firms like Morgan Stanley or Salomon Brothers actually do for a living...
...For Professor Himmelfarb, this transition from a living and sustaining faith in God to a belief in "nothing" is the clue which illuminates the "moral imagination" of the Victorians, and ex-plains their obsession with morality: Feeling guilty about the loss of their religious faith, suspecting that that loss might expose them to the temptations of immorality and the perils of nihilism, anticipating the Nietzschean dictum that if God does not exist everything is permitted, they were determined to make of morality a substitute for religion—to make of it, in-deed, a form of religion...
...GREED AND GLORY ON WALL STREET: THE FALL OF THE HOUSE OF LEHMAN Ken Auletta/Random House/$19.95 George Sim Johnston The publication last spring of Ken Auletta's account of the fall of Lehman Brothers, Wall Street's oldest investment bank, marked an epoch of sorts for the New York Times Magazine...
...Auletta, a gifted reporter, was fortunate in that these two men seemed to represent a conflict that is as old as Greek tragedy—that between the rational and impulsive sides of human nature They also embodied a clash between two cultures which maintain an uneasy alliance on Wall Street—that of the pin-striped investment bankers, who sit in deceptively quiet offices and collect enormous fees for rearranging the balance sheets of corporations, and of the shirt-sleeved traders, who make and lose even larger sums of money shouting into telephones...
...the firm had failed to achieve the sort of cultural consensus which had long been established at competitors like Salomon and Goldman, Sachs—both of which were leaving Lehman in the dust at the time...
...The book's title is somewhat misleading, suggesting as it does a study in social history...
...This, then, was the ethos of Victorian civilization during its high tide—a well-nigh fanatical devotion to Christian morality coupled with a stark rejection of Christian theology...
...I always keep my back to the wall of the latrine...
...His movement sought to recapture the vitality and scriptural faith of early Christianity, and emphasized such virtues as reverence, sobriety, and prudence...
...Like most autocrats, he was not terribly interested in nurturing a successor...
...He immediately started to settle scores, particularly with the in-vestment bankers many of whom began to jump ship, taking their capital with them...
...but the compensation of a top investment banker always ends with plenty of zeros...
...Something of my earlier sense of bedazzlement returned as I read Professor Himmelfarb's latest book, Marriage and Morals Among the Victorians...
...In the old days, when money was cheap, a corporate treasurer could get by with few talents...
...signature name address THE AMERICAN SPECTATOR JUNE 1986 41 occupation is dress a more significant subtext...
...It was a rather difficult and demanding act to carry off, and Professor Himmelfarb .is right in calling it an admirable at-tempt...
...I mean to live and die like a gentleman if possible...
...It was no longer infra dig to scream all day into a telephone...
...But when interest rates soared (and the stock market collapsed), the job became more complicated and in the end devolved on business school technocrats...
...The masseur was on the phone with a bookie placing the man's bets...
...Both sides at Lehman had their share of distended egos, and Auletta's reportage not only tells us much about what goes on in high finance today but also gives the sort of Balzacian pleasures that our current crop of novelists are simply not up to providing...
...To order, or for a copy of our catalogue, write: LibertyPress/LibertyClassics 7440 North Shadeland, Dept...
...people who don't know the difference between a utility stock and a futility infielder, and think that a yield curve is something dreamed up by the department of high-ways became instant partisans in the battle between Peter Peterson and Lew Glucksman, whose, quarrel led to the firm's disappearance into the maws of American Express...
...We pay book rate postage on prepaid orders...
...All orders from outside the United States must be prepaid in U.S...
...His biggest fault, by Auletta' account, was his inability to bury past grievances...
...The peak years for an investment banker run from roughly thirty to forty-five or fifty...
...ment banking...
...Includes controversial and celebrity trials...
...On the contrary, Joseph Shattan, a frequent contributor, is a writer living in Washington, D.C...
...Peterson did a brilliant job of turning the firm around, and by the late seventies Lehman was once again fat and prosperous...
...a culture, moreover, "that was all the more admirable, perhaps, because it tried to maintain itself without the sanctions and consolations of religion...
...Hans Zeisel, co-author of The American Jury ^ .. Most valuable, most worthwhile...
...Although the business is said to be entrepreneurial, young bankers during their first year or two on the job are paid for the same reason that starting lawyers and ac-•countants are paid lesser sums...
...In these lectures, Smith demonstrated the connection of language and the ability to communicate thoughts and inclinations to the development of sympathy and fellow-feeling, concepts central to his more famous works...
...and Glucksman might have made it anyway if the markets hadn't turned sour in early 1983, putting the firm in the red...
...Melvin M. Belli Also available .. . DIOXIN, AGENT ORANGE THE FACTS by Michael Gough "Michael Gough has written one of the best books around on dioxin...
...According to Professor Himmelfarb, however, the Victorian ethos was not at all conventional or complacent...
...El Some years ago, I was privileged to take part in a seminar on nineteenth-century English thought conducted by Professor Gertrude Himmelfarb...
...Just as the exponential growth in litigation is a boon to lawyers, but not to the rest of us, so a lot of what goes on on Wall Street in the way of leveraged buy-outs and greenmail swells the pockets of the direct players but probably impoverishes society as a whole...
...How many current novelists could in-vent Glucksman's explanation of how he got to the top, shouted at a friend across a crowded party: "You know how I do it, Michael...
...A television set was blaring...
...Illuminates some intriguing behind-the-scenes drama...
...The associate who produces the spreadsheet gets little notice—unless somebody spots a mistake Then the consequences can be brutal...
...Introduction, appendices, index...
...An Ivy Leaguer by way of the Racquet Club would no more dream of becoming a trader than he would a hod carrier...
...Most of the new prosperity, however, came from the trading operation, and this was the work of Lew Glucksman, who, with his short temper and vivid Anglo-Saxon vocabulary, exhibited all the classic personality traits of a trader...
...the gradations of loafers, for example, running from brogue wing tips to buckles, are endless...
...for them the "old school tie," if it meant anything, was a mat-ter of MBA networking, not drinks at the Princeton Club...
...When Lehman died after a long illness, the partnership drifted ,into chaos...
...And the subsequent curve is practically vertical for the best performers...
...Henry James after meeting Winston Churchill: "It brought home to me very forcibly—very vividly—the limitations by which men of genius obtain their ascendancy over mankind...
...AS Flagstaff, AZ 86002 Toll Free 1-800-FINE BKS In Arizona, 1-800-46-BOOKS FREE COMPLETE CATALOG AVAILABLE THE AMERICAN SPECTATOR JUNE 1986 43...
...Once alone at the helm, Glucksman made a series of blunders which ultimately ended the firm's run as Wall Street's oldest private bank...
...It was the traders who now provided much of the "product" that bankers peddled to their clients...
...Book orders by individuals must be paid fully in advance...
...And, of course, there was Charles Darwin, who when asked about the implications of his theory for religion and morality, replied that the idea of God was "beyond the scope of man's intellect," but that a man's moral obligation remained what it always had been: to "do his duty...
...But slowly and deliberately, in essay after essay, Professor Himmelfarb unfolds her thesis, until one is finally convinced that this is the way it must have been, after all...
...Now available is, Lectures on Rhetoric and Belles Lettres, a transcription of the notes of an unknown student who attended Smith's lectures in 1762-63...
...A few months later yet another LibertyPiess LibertyClasstcs Lectures on Rhetoric and Belles Lettres By Adam Smith The Glasgow Edition Edited by J. C. Bryce To celebrate the bicentenary of the publication of Adam Smith's Wealth of Nations in 1976, the University of Glasgow commissioned a new edition of Smith's extant works and correspondence to be published by Oxford University Press...
...Well, that organizations, like people, are far queerer on the inside than they seem on the outside...
...It begins with John Wesley, who in the eighteenth century inaugurated an evangelical reform movement within the Church of England known as Wesleyanism, or Methodism...
...Please allow 4 to 6 weeks for delivery...
...Indeed, he seemed to enjoy sitting back and watching his partners fly at each others' throats...
...Second, corporate financedepartments could no longer afford to be a grazing ground for preppies...
...date account no...
...At Lehman, the bankers were still very much the gentry...
...And so the two cultures on Wall Street began to merge...
...shirt collars have even more nuances), but in the big firms the two arms of the business were finally talking to each other...
...Finally, we see that investment bankers are in the same moral predicament as other professionals in our society...
...Lehman under his brief tenure was like an Ottoman satrapy, full of intrigue and back-stabbing...
...Swift maturation is essential...
...244 pages • 40 photographs • 6 x 9 • index map • 0-87358-395-7 • hardcover $21.95 NORTHLAND PRESS P.O...
...LibertyClassics is publishing softcover versions of these volumes printed so as to provide exact copies of the hardcover editions...
...they extract them from annual reports and registration statements, multiply or divide by other numbers, and put the results on a spreadsheet...
...Or the scene where Peterson, newly arrived at Lehman, is advised to meet with a senior partner, Joe Thomas, the man who put together Litton Industries, "a rugged individualist who thought the New York Times was a left-wing newspaper and only read the New York Daily News and the Daily Racing Form...
...Investment banks, although they sit profitably at the epicenter of the American economy, are still by and large a mystery to the general public...
...They may be right, but one still regrets the passing of the old order...
...R102 Indianapolis, IN 46250 42 THE AMERICAN SPECTATOR JUNE 1986 MARRIAGE AND MORALS AMONG THE VICTORIANS Gertrude Himmelfarb/Alfred A. Knopf/$19.95 Joseph Shattan Wall Street firm had merged under...
...In fact, Professor Himmelfarb's collection of essays has far more to do with intellectual than with social history...
...All he had to do was to pick up the phone and he had thirty-year money at four percent...
...The two-part article was a staple of conversation everywhere...
...For the next generation, it turns out, was Bloomsbury...
...Glucksman wanted the whole firm for himself and succeeded in getting Peterson to walk the plank in July 1983, albeit with seven million dollars in the way of severance pay...
...When it comes to describing Bloomsbury—both its hard core (VanNorthland Press THE GOLDWATERS OF ARIZONA by Dean Smith Foreword by Senator Barry Goldwater This is an immigrant's tale, a saga of success mixed with absolute failure, of joy and grief...
...They spend most of their time crunching numbers...
...To be fair to Glucksman, this was in part Bobbie Lehman's legacy...
...Its phenomenal success, which cut across class lines, led to a largely successful moral reformation, and laid the groundwork for the eventual democratization of English political life...
...Or are they merely putty in the hands of lawyers well trained in the arts of influence and manipulation...
...But it is intellectual history of a very special kind, since it deals not with the formal ideas and philosophies of Victorian thinkers, but rather with underlying, only half-articulated premises, with attitudes, states-of-mind, temperaments, and dispositions...
...Until the late sixties, bond and stock traders were in an entirely different social category from their colleagues in Corporate Finance (as investment banking departments are known...
...Senator Albert Gore, Jr...
...By weaving these research findings into the forever exciting narratives of actual jury trials, the authors have writ-ten both an attractive and an important book...
...Although by the middle of the nineteenth century the theology underlying evangelicalism had lost its hold on many of England's most gifted minds, the evangelical spirit, the concern for morality and social reform, remained compelling...
...Suddenly, companies like IBM and General Motors were shopping the Street for deals, breaking in the process banking relationships as old as the Glass-Steagal act...
...Roy Blount, Jr., reviewing a book about Time Inc.'s cable magazine fiasco, recently wondered why the enormous salaries of corporate executives are always prime numbers...
...Professor Himmelfarb starts off by reminding us that the Victorian era really dates from before Queen Victoria's reign...
...the money was too spectacular...
...Bankers, like lawyers, answer that they have no choice, that they are responding to forces larger than them-selves...
...r ORDER FORM-Please send me__copies of Judging the Jury ISBN 0-306-42255-7 @ $17.95 each...
...I now believe in nothing," confessed the distinguished Victorian intellectual, Leslie Stephen, "but I do not the less believe in morality...
...The trig cadets from Harvard, Stan-ford, and a few other business schools invariably land at the half dozen or so major investment banks...
...It still helped if you looked the part, but you had to be talented...
...The authors combine their expertise in both law and psychology to answer these and other questions in a well presented, highly readable account...
...But they learn soon enough—it only takes a dormitory bull session or two, for when the talk turns to money (as it always does on that side of the Charles River) it turns to investGeorge Sim Johnston is a writer living in New York...
...type of card exp...
...Last year, I am told, one investment bank paid $125,000 to MBAs, many in their mid-twenties, for their first full year...
...The new dispensation came easier to some firms than others...
...There, in the Arizona territory, they made an indelible mark upon southwestern history and, ultimately, through Barry Goldwater, upon the history of the nation...
...The House of Lehman was finished off by—a magazine article...
...It was the first time that copies of the Sunday supplement lingered on coffee tables all over the Eastern Seaboard for reasons other than the real estate ads...
...And it is with the next generation that the trouble sets in...
...Until the late six-ties, the firm was guided by the last of the great Wall Street autocrats, Robert "Bobbie" Lehman...
...Fortune published a devastatingly accurate account of the firm's internecine conflicts which claimed that a majority of the partners wanted out...
...The heads of the largest industrial corporations make peanuts compared to their brethren on Wall Street...
...10013 Competency or Crockery...
...Or as Professor Himmelfarb herself puts it, her concern is to delineate the "moral imagination" of the Victorians, "an imagination that penetrates all aspects of life—mind, literature, politics, social affairs, and, of course, personal conduct...
...Ken Auletta's Greed and Glory on Wall Street makes it clear that it probably came hardest to Lehman Brothers...
...No other occupation offers such lavish sums...
...But what has remained with me through the years is the image of Professor Himmelfarb as a kind of intellectual conjurer, someone who would invariably prove to us that the book we had just read meant exactly the opposite of what we all thought it meant...
...Glucksman was rightly resentful that, while his traders were producing most of the firm's profits, the investment bankers were taking home most of the money and all the prestige...
...Meanwhile, a new breed of financial officer was taking over at the corporations with which investment banks did business...
...This crowd did not particularly care whether their investment bank conducted its business like a wine tasting...
...In one hand the naked man held a lit cigar and in the other a glass of vodka...
...Please send me._copies of Dioxin ISBN 0-306-42247-6 @ $17.95 each...
...First, traders gained enormously in prestige They were producing more than half the profits at some firms and it was no longer possible to ignore them...
...That correct intuition about other people's psychologies is far more valuable in a corporate leader than technical brilliance...
...dollars...
...Dickens and Balzac would obviously have had no complaints writing about Lehman Brothers...
...What lessons do we learn from Auletta's interesting tale...
...Ivy Leaguers, in fact, began to decamp to the trading rooms...
...Peter-son eventually elevated Glucksman to co-chairmanship, only to learn what a lot of political leaders learn the hard way, that the granting of concessions to disgruntled parties only leads to demands for new concessions...
...The duty to be moral, they believed (or wanted desperately to believe), was not God-given but man-made, and it was all the more "peremptory and absolute" for that...
...A Daily Racing Form rested on his ample stomach...
...After a year or two of making numbers jump and heel and displaying good table manners with clients, the associate moves into a small office and eventually either succeeds or fails at finding his chair in the partners' dining room...
...Still, the end was embarrassing...
...All of this had several consequences for the social order on Wall Street...
...I was young and callow back then, and I'm afraid that of the actual subject mat-ter of the seminar I can recall very little today...
...Finally, with the explosion of different financing vehicles (Eurodollar convertibles, zero-coupon bonds, bullet preferreds, and on and on), a firm's agility in the markets became increasingly crucial to its banking effort...
...All major credit cards are accepted...
...And he manages this without relying on some of the more dubious tricks of the New Journalism, such as the working of people's thoughts into the narrative as if the writer had access to a cortical printout...
...an associate still in his twenties is expected to hold his own with the senior management of a Fortune 500 corporation...
...Peterson is told that he can find Thomas in the firm's gymnasium: Entering the gym that morning he saw only a man stretched out naked on a massage table, clear plastic tubes connecting his nostrils to an oxygen tank...
...And the difference in pay scale starts right away...
...With their wide neckties and rude suspenders, they were always invited after dinner, as it were...
...Similarly, the novelist George Eliot concluded that belief in God was "inconceivable," immortality was "unbelievable," but moral duty was "peremptory and absolute...
...What is so remarkable about Professor Himmelfarb's study is not only that she can actually discern an underlying ethos in an age as complicated and filled with change as the Victorian era, but also that the ethos, or "moral imagination," which she brings to life is quite different from anything we might have expected...
...The article created sheer panic among the partners, who were now ready to sell at virtually any price...
...Box N, Dept...
...Previously published are The Theory of Moral Sentiments, Lectures on Jurisprudence, Essays on Philosophical Subjects, and, in two volumes, The Wealth of Nations...
...Softcover Only $5.50, 0-86597-052-1 Prepayment is required on all orders not for resale...
...This singular image of Victorian culture is so much at variance with the standard view that one's initial reaction is to dismiss it out of hand...
...that is, not to make mistakes...
...291 pages...
Vol. 19 • June 1986 • No. 6
