By Peter Field
You might expect a book with the title ‘Greed and glory on Wall Street: the fall of the house of Lehman’ to be about the collapse of the investment bank in 2008. But you would be wrong.
The book, written by Ken Auletta, was published in 1986 when the “fall” of Lehman referred to its takeover by Shearson American Express in 1984. But the firm got a second chance, after being spun off by American Express in 1994, to prosper again until its complete demise in 2008.
The end of the firm’s independence in 1984 stemmed from a power struggle at the top between co-chief executives Peter Peterson and Lewis Glucksman that had been festering for some time, as was clear from my article in Euromoney three years earlier (April 1981), from which Auletta’s book quotes.
Even on the other side of the Atlantic from its New York headquarters, we had picked up gossip about the tensions within Lehman because of the lack of a clear strategy and its half-hearted attempts to develop international business.
We decided to interview Peterson and Glucksman and put to them some of the criticisms being levelled at the firm. Each in their own way, and sometimes unwittingly, confirmed the gossip circulating in the markets about the differences between the two.
Even the picture of Peterson and Glucksman in the first spread of the article doesn’t suggest much warmth between the two men. Glucksman was apparently biding his time until he could oust Peterson, which he succeeded in doing in 1984.
This was a remarkable and unlikely coup since Peterson had been brought into the firm in 1973 to provide stability and staunch the firm’s losses after the death of senior partner Robert Lehman in 1969. And Peterson performed his task well.
The Euromoney article, ‘How corporation man transformed Lehman’, revealed the patchiness in the firm’s performance, the infighting, the yearning to be admitted to the top tier of Wall Street houses, the ambivalence to international business, particularly in Europe, and some strange attitudes and practices, such as Glucksman’s recruitment policy.
At job interviews, he asked potential employees to touch the ceiling. If they could, he hired them because he wanted to maintain the firm’s pre-eminence in a Wall Street basketball league. Glucksman’s justification was that basketball players are good team players in business, as well as in sport.
Glucksman was the main reason that other houses saw Lehman as parochial. The quote at the beginning of the story comparing London with Indianapolis made others in the firm cringe, including Peterson.
Lehman’s London office added a clock for Indianapolis to its trading room wall to go with London, Tokyo, New York, Chicago and San Francisco. Some months after the article appeared when I visited the London office, I noticed the Indianapolis clock didn’t have any hands.
“They wouldn’t know the time of day in Indianapolis anyway,” a trader explained.
Peterson may have been smoother than Glucksman and an operational mastermind, but to a Briton like me he used some clumsy language. He is described in the article as: “The sort of man who wraps his thoughts up in three words where one will do.”
About Bobby Lehman, for instance, he said: “He must have been a really remarkable human being and person – a kind of Toscanini of this industry.”
But Peterson had the last laugh. After his departure from Lehman, he and Stephen Schwarzman, who had worked closely with him at Lehman and had also left the firm, set up Blackstone and made themselves billionaires. Peterson died in March 2018. Glucksman died in 2006.
The Lehman piece was one of many profiles I wrote of banks and investment banks and/or their chief executives between 1977 and 1985 at Euromoney. Euromoney had pulling power even then. And the magazine allowed its journalists to travel anywhere in the world if they could make a case for a story.
I got to attend all the annual meetings of the IMF and World Bank between Belgrade in 1978 and Seoul in 1985. At these meetings you could rub shoulders with ministers and bank chief executives – people you don’t normally get to meet.
At the September 1982 meetings in Toronto, I was summoned to the hotel suite of the then prime minister of Peru, Manuel Ulloa Elias. We had run a cover story suggesting that Peru would be the next Latin American country to default in the continent’s widening debt crisis.
Incensed, he demanded to see Padraic Fallon, the editor, and me, the one who had put the cover story together.
We took a 20-minute dressing down by the minister, along with a denial that default was on the cards. Tempers flared over the Falklands War, with Fallon, an Irishman, being a great Anglophile. The war had only ended a few weeks before.
Of course, Peru did default – quite soon after – and Ulloa got the chop. We gleefully wrote an editorial, ‘Ulloa and goodbye’, but not surprisingly a lot of readers failed to get the dreadful pun.