House of cards, p.27
House of Cards, page 27
ON APRIL 26, 1978—a few days shy of the firm's fifty-fifth anniversary— the Bear Stearns partners met at the Harmonie Club for their annual dinner to celebrate another successful year. The dinner was also slated to be a retirement party for Lewis, who at age sixty-nine had come to realize that he no longer had the mental or physical energy to run the firm. For Lewis, the Harmonie Club was fraught with negative connotations. This was where a former flame's father had rejected him as the suitor for his daughter. In addition, years earlier the club had rejected him for membership. “Actually, the party setting had more to do with convenience than with any personal tribute to Lewis, who was hardly the main issue on the partners' minds,” Ehrlich and Rehfeld wrote. “For many partners, he was already part of their past—or more to the point, a tyrant whom they wished would leave quietly…. The close of that fiscal year had confirmed that earnings had slipped from the previous year. Reversing that trend was the primary issue for everyone at that party.”
During the brief ceremony to honor Lewis, John Slade recalled how when he started at the firm, earning $15 a week, Lewis had been instrumental in his career advancement. Slade told his partners he owed “everything” to Lewis for helping to make him rich. His Park Avenue apartment was lined with works by Picasso, Miró, and Chagall. Slade then gave Lewis a gold Piaget watch specially ordered from Switzerland. “As he started unwrapping his gift, Lewis began to shake violently,” according to Ehrlich and Rehfeld. He had suffered a massive stroke. An ambulance rushed him to Mount Sinai Hospital, with his partners Teddy Low and Dick Fay by his side. (Some have suggested that one of Lewis's partners took his new Piaget watch.) Cy Lewis died two days later. “Dad died from the inside out,” Sandy Lewis said. “He did not want to live. The rest have died from the outside in. Few came honest. None leave honest.”
HAIMCHINKEL MALINTZ ANAYNIKAL
ce Greenberg took over the running of Bear Stearns the day Lewis died. Greenberg's management style—very different from Lewis's—began to reveal itself in the months after Lewis's death through a series of memoranda, some decidedly tongue-in-cheek, he wrote to his partners. “Bear Stearns is moving forward at an accelerated rate and everybody is contributing,” Greenberg wrote in the first memo, dated October 5, 1978. “It is absolutely essential for us to be able to talk to our partners at all times. All of us are entitled to eat lunch, play golf and go on vacation. But, you must leave word with your secretary or associates where you can be reached at all times. Decisions have to be made and your input is important! I conducted a study of the 200 firms that have disappeared from Wall Street over the last few years, and I discovered that 62.349% went out of business because the important people did not leave word where they went when they left their desk if even for 10 minutes. That idiocy will not occur here.”
Six months after Lewis's death, on November 16, Teddy Low died at Lenox Hill Hospital. For Greenberg, the passing of both Lewis and Low in the same year was a seminal time in the firm's history because, as he once said, it was forced to not “do anything dumb.”
To Cayne, Cy Lewis's death was little more than a reminder that Lewis had not fulfilled his promise to Cayne to put him on the firm's executive committee. Cayne blamed Greenberg for letting the matter slide. “Greenberg never had the balls to take him on,” Cayne said. He was determined not to let the Grim Reaper decide when and if he became the senior partner of Bear Stearns. When a socially acceptable amount of time had passed after Lewis's death, Cayne brought Greenberg back to the topic of becoming a member of the executive committee. “I get back in the car and I said to Greenberg, ‘You can't hide anymore under Lewis. It's your call. I expect to be on the executive committee.' He said, ‘Well, there's a problem with that.’” Cayne had figured out that several of his fellow senior partners, among them Marvin Davidson and John Rosenwald, didn't want him to be on the executive committee. Cayne told Greenberg: “Yeah, and I know who they are, and I know if they're not here, we're better off. I know they do dick. I know that they're worthless. If they're on the executive committee and you're telling me they have the ability to stop me, I'm at the wrong firm.”
“Well, what does that mean?” Greenberg replied.
“It means I'm at the wrong firm,” Cayne replied. Cayne prided himself on the veiled threat. He preferred to let the implication that he might leave the firm hang in the air like the smoke swirling from one of his ubiquitous imported cigars.
He also had thought a few moves ahead. Through a bridge connection and client, Cayne arranged for an interview at Goldman Sachs with the new senior partner, John Weinberg. After the interview Cayne called the client, who told him that Weinberg thought “it was the best interview he ever had” but “you're too hot to handle.”
Cayne told Greenberg that he'd had the interview with Weinberg, though he didn't let on how it had gone. “He knows that if I leave, the sales force leaves and a lot of bad things happen,” Cayne said. “So now I go and say to Greenberg, ‘It's D-Day.’” Greenberg told him what Cayne already suspected: that Davidson and Rosenwald were blocking his promotion and that Cayne had to win them over to get what he wanted. But, according to Cayne, Davidson knew “that I tried to shoot his ship down”— a reference to Cayne's effort to block Davidson's purchase of some New York City bonds in 1975—“and basically didn't talk to him because I knew he stole. I didn't have to talk to him. Managing partner of the firm means dick to me. I didn't take any orders from him. I had nothing to do with the guy.”
Cayne went to see Rosenwald and Davidson and had a blunt conversation. “Obviously, I've been requesting to become part of the executive committee because I deserve it,” he said to them. “They said, ‘Well, change is good, and we're going to make an addition to the executive committee. We're going to announce inside of a week that Jerry Goldstein'”—who ran the retail branch network—'“is being added to the executive committee.' I said, ‘And that's it?' They said, ‘Yes.' I said, ‘Okay, so just so you understand how I feel. I don't really know how I'm going to react when I see that in writing. Have a good day.' And I got up to leave.”
About twenty minutes later Greenberg called Cayne. “I don't know what you said to these guys,” Greenberg told him. “But you're in.” He had succeeded in becoming a member of the firm's powerful executive committee just nine years after arriving at Bear Stearns with nothing more than some bridge contacts and a salesman's charm. Cayne credited the success of his gambit to the subtlety of his strategy with Davidson and Rosenwald. “Because when I said, ‘I didn't know how I was going to react,' I didn't threaten to quit,” he said. “I said, ‘I don't know how I'm going to handle that,' but there was no more conversation. I just left because they were telling me no.”
In short order, Cayne's partnership points were the same as Davidson's and Rosenwald's. Then Cayne was tied with just Rosenwald. Soon Davidson left; by 1982, Cayne said, he was the number two partner at the firm.
But his ambitions were still not slaked. To get to the top, he knew he would have to continue his artful and simultaneous cultivation of Greenberg as well as the other members of the executive committee. It was a delicate operation that Cayne performed with the precision of a brain surgeon. He continued to drive Greenberg to work every day; Cayne would occasionally break the painful silence of those trips to malign his partners to the boss while promoting himself. He also began to court the other leaders of the firm, or at least those whom he hadn't already alienated.
AT THE SAME time that his professional status morphed, Greenberg had been undergoing changes in his personal life as well. In 1975, he left his wife, Ann, after twenty-two years. (She later committed suicide by jumping out a window.) While his Fifth Avenue apartment remained filled with the French furniture she bought, he began to accumulate the talismans afforded him by his wealth, newfound bachelorhood, and frenetic hobbies. On one wall was the head of an antelope he'd shot in Africa using only a bow and arrow. He had a vast collection of books about magic, which he studied relentlessly to perfect his craft. He perfomed his magic tricks at dinner parties all over the Upper East Side of Manhattan. This most eligible bachelor, who looked something like a less ghoulish Uncle Fester, was becoming the toast of the town. He dated many prominent women. “There was a certain guiless charm about him,” according to Ehrlich and Rehfeld. “Although he had a dry wit and seemed highly approachable, he was neither glib nor polished.”
One day, during their morning drive downtown, Greenberg told Cayne a story about his personal life that Cayne never forgot. At that time, Greenberg was between marriages—he would marry Kathryn Olson, a lawyer, in 1987—and had been dating regularly but was growing increasingly concerned about the risk of contracting AIDS. “He decides he's going to get married,” Cayne says. “And he's one of the guys that's dating Barbara Walters. She's dating the schvartze from Massachusetts [Ed Brooke, the first black U.S. senator and later a special limited partner at Bear Stearns]. She's dating Alan Greenspan. She's dating him. He says to me, ‘I've decided I'm going to marry Barbara Walters.'… The very next day in the papers: She's engaged to Merv Adelson. I never said a word. Now, normally, you know, if it was one of my buddies, I'd say, you know, ‘Pretty good call there, pal. You're marrying her, except for that she's marrying somebody else. It's not even going to be a real marriage because that's called bigamy.' But I didn't say a word.”
Along with the daily car rides—and as had been foreshadowed by their very first meeting in 1969—bridge turned out to be the skeleton key that unlocked any impediments to Cayne's rapid rise at the firm. In 1967, five years before becoming a partner at Bear Stearns, Cayne had ascended to the rank of a bridge “life master,” courtesy of the American Contract Bridge League. In contrast, Greenberg was a mediocre bridge player at best, by his own admission. Nevertheless, Greenberg pushed Cayne to “teach me the game and I'll become your partner.” At the time, Cayne said he thought about how having Greenberg as his bridge partner would hurt his career at Bear Stearns. Supposedly, he declined Greenberg's offer.
But not for long. Soon enough, Cayne reversed course and decided that taking Greenberg under his wing—at the bridge table, anyway— would pay dividends. By November 1977, Cayne's five-member team— including Greenberg and Jim Jacoby, a Bear Stearns broker from Dallas—won the Reisinger team championship at the American Contract Bridge League's fall championship held in Atlanta. Their margin of victory was tiny but good enough to win and to qualify the team for the 1978 International Team Trials, the first step toward potentially being the country's representative to the 1979 world team championship. Cayne refered to the victory as “a miracle” that had to do more with some of the nuances of bridge than Greenberg's skill. “It happened because you have to play bridge to understand it,” he said. “An uneven partnership can be very effective if the uneven guy just doesn't get in your way.” When Alan Truscott, of the Times, wrote about Cayne's victory, he refered to the team as “the Greenberg team,” a slight that must have ticked off Cayne. (Cayne said this never bothered him.)
FOR SOME AT Bear Stearns—and as if there weren't already enough pitfalls in a Wall Street career—playing bridge became an occupational hazard, what with the two top partners at the firm playing on the same team and winning national and international tournaments together. “Playing with or against the boss can be a tricky business,” Alan Truscott wrote in the Times in 1979. “Consider, for example, the plight of Jim Rosenbloom, a young New York expert, in the final of the Big Apple Regional Knockout Team Championship played earlier this summer.” Rosenbloom had just joined Bear Stearns and found himself opposite Greenberg and Cayne. “Would you try to impress the bosses with your shrewdness?” Truscott wondered. “Or would you concern yourself with keeping them happy? The latter might seem more important in view of the fact that one of the bosses was heard to announce cheerfully, ‘If Rosenbloom wins, he'll be out of a job tomorrow.’” The question for Rosenbloom quickly became moot in the Big Apple Regional because Greenberg's team “galloped to an easy victory.” Soon enough, though, Rosenbloom was playing on the same team as his bosses, Greenberg and Cayne, and they were all winning.
By 1982, Truscott was reporting how “bridge experts in a favorable locale can multiply like the proverbial rabbit, although rather less rapidly.” He cited Bear Stearns as an example of this phenomenon. In 1975, Truscott explained, Bear “had one bridge expert, Jim Cayne, and one enthusiast, Alan Greenberg, who wanted to be an expert and with Cayne's help soon became one.” Truscott described Cayne as “an ebullient fast-talking character with a great will to win.” Seven years later, Bear Stearns had ten bridge players, two who had won world titles and four who had won national titles. “So students who devote their time at college to playing bridge now have the perfect answer to their complaining parents,” Truscott wrote. “They are preparing themselves for a successful career in the world of finance.”
Cayne claimed that in 1983, two years after winning the gold medal at the Maccabiah Games with Greenberg as his partner, Cayne told Greenberg he had decided to give up tournament bridge. What he didn't tell Greenberg was that he had decided to quit so that he could get out of having Greenberg as his partner. The team had suffered an embarrassing loss at the Grand National Team Championship, and Truscott had written that up in the New York Times. “When you can't win, you lose your mojo,” Cayne said. “I couldn't win. Couldn't win with him.”
Cayne's ultimate solution to the problem was, he said, to stop playing tournament bridge for six years. The truth appears slightly more complicated, though. Throughout the 1980s, Cayne's name appeared regularly in Truscott's bridge column, sometimes playing with Greenberg, sometimes with Chuck Berger and others. In any event, by 1989, Cayne was back playing tournament bridge with a passion but without Greenberg on his team. Indeed, Cayne designed his vacation time around these tournament bridge events, which take place in varying locations around the country three times a year for around a week at a time. The tournaments are extremely intense, with play beginning in the afternoon and continuing until late at night. Cell phones and BlackBerry-type devices are not permitted—not that Cayne used them—and during matches, players are not to be interrupted. “I got back into tournament bridge and it became part of my life,” Cayne said. “Every four months I'd go away and play for a week somewhere. That was always my vacation. Christmas, we'd go for a week and a half, two weeks, to Florida or whatever, but I never took time off during the week or anything. The summers, I would go down to the shore on Friday, usually with Lewis, until he died, and then went down myself. I'd end up going down Thursday night on a chopper so I could play Thursday night, play golf Friday morning, go back to my house in Jersey, whatever. I never had an issue with being unavailable ever.”
BRIDGE ASIDE, THERE was a firm to run, and Greenberg wasted little time after Lewis's death in putting his own mark on it. He used to tell people, “Tomorrow we're going to do more of the things we did today, only better.” According to a former Bear Stearns senior managing director, “That was the entire strategy of that firm. It didn't matter what financial markets did. It didn't matter what innovations took place. It didn't matter that other people's cultures changed. It didn't matter. That's what we're going to do.” For close to twenty years, that proved to be effective. One of the ways Greenberg chose to reinforce his business strategy with his troops was through an incessant stream of lighthearted but nonetheless often scolding memoranda that he sent to his partners. To do the admonishing, he created an alter ego, a Charlie McCarthy for his Edgar Bergen, in the form of one Haimchinkel Malintz Anaynikal, a “famous philosopher” whose role appeared to be to remind everyone to be frugal at all times. “We had to start doing things,” he said of the reason the memo writing started. “The firm hadn't made much money the few years before that, and the times of course helped, there's no question about that. But we stayed alive and we started making a lot of money.” March 13, 1979, marked Haimchinkel's first public appearance. Greenberg informed his partners that the firm had just signed the papers for a $12 million long-term loan from an insurance company to replace one with the First National Bank of Chicago. “The implications and the actual dollar savings of this agreement are of tremendous importance to Bear Stearns & Co.,” he wrote. He also said the financial results for February were “great.” “The developments at Bear Stearns certainly seem positive and as a result we will, of course, intensify our surveillance of all positions and expenses,” he continued. “You know how I feel about the dangers of overconfidence. It certainly looks like we have a dynamic future in store as long as we remember the words of the famous philosopher, Haimchinkel Malintz Anaynikal: ‘thou will do well in commerce as long as thou does not believe thine own odor is perfume.’” A week later, he sent around a news article to his partners and “other potential perfume lovers” about how Dean Witter, one of Bear's competitors, had reported an $886,000 second-quarter loss.
On June 15, Greenberg informed his partners that in the first quarter of 1979, the firm had generated revenue of $51.6 million, or 2.1 percent of Wall Street's revenues, and pretax income of $11.3 million, which was nearly 5 percent of the pretax profits for the entire industry. The message was clear: The firm's tight lid on expenses had enabled Bear Stearns to be relatively more profitable than its Wall Street peers, an achievement Greenberg wanted his team to repeat. “I would also like to add that the last three weeks have been a thing of beauty,” he wrote. “Every department is really boiling and some of the new people that we have taken on are starting to make real contributions. Because of this good news, I think it is time for us once again to spend some time reading the works of, and reflecting on the thoughts of, Haimchinkel Malintz Anaynikal.” On January 30, 1980, Greenberg was again happy to report good news about the firm's financial results. “Some of the things that have happened to us have been due to our own efforts, but equally, some of our good fortune of late has been due to luck,” he wrote. “I have been around long enough to know that shoe usually falls on your head when you least expect it.” He then quoted Haimchinkel Malintz Anaynikal's observations from his March 1979 memo.
