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Authors: Vicky Ward
Tags: Non-Fiction, Business
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commission. They neither cared about nor understood investment banking, whereas Lehman had its deep roots in providing initial capital to firms like the Woolworth Company, Sears, Roebuck & Company, the Studebaker Corporation, and RCA .
The Lehman executives thought that the Shearson brokers were self-centered idiots; the Shearson brokers had little comprehension of what the Lehman guys were doing. As for Lehman Commercial Paper Inc. (LCPI)? They thought they were the modern -day equivalent of the Three Musketeers--“all for one, one for all.”
“They were the only unit in the entire organization which had salaries and systems entirely for themselves,” says Peter Cohen. More than 20 years later he still sounded irritated by that.
They proudly identified themselves as the working class of Wall Street, and in their rarefied circles—and bank accounts—they were. They smirked at the extravagances of Cohen, who at 38 was the CEO of Shearson Lehman. He was an easy target. At a year-end party hosted at the Greenbrier resort in White Sulfur Springs, West Virginia, Cohen arrived atop an elephant.
“A circus had been provided as part of the entertainment, and someone said ‘Why don’t you ride an elephant?’ so I did,” he explains.
But the moment became a running joke among the Lehman traders.
Cohen had worked his way up the operational side of Shearson, but had little experience in investment banking and none in capital markets; he was resented.
Joe Gregory told people that Cohen’s first meeting with the Lehman team was a disaster--Cohen had come to placate his new employees, but he only enraged them. He came across as high -handed and was met not with obedience, but with derision.
“Basically he came in and told us that each January his brokers knew they would make a million dollars that year,” says Bob Shapiro. “It was meant to be inspirational but what it showed was that he had no idea who his audience was. We were people who could lose a million in the final two weeks of the year. That was our business. It showed us he had no clue about what we actually did.”
“Of course they didn’t like me,” Cohen retorts. “I was younger than a lot of them, I was their boss, and they were a bunch of difficult guys.”
----
The Lehman veterans continued to isolate themselves from the rest of the company. In a small sign of rebellion, Pettit’s troops answered their phones with “Lehman,” snipping off the prefix “Shearson.”
“They were tough people, and they made money,” recalls John Cecil, a McKinsey consultant who was brought in by Pettit and who would later become the firm’s chief financial officer. “No one wanted to mess with them, because they were known as people who’d push back if you’d try to tell them what to do. They took over other businesses in the company, and they hired most of the other people who went on to be senior management.”
Cohen tried to exert control over LCPI , but this was a revolution that wouldn’t be put down. The Lehmanites took pride in running circles around him.
----
Cohen had to negotiate between LCPI and Shearson/American Express mainly over two subjects: LCPI ‘s compensation and the amount of leverage (or, as the American Express board saw it, risk) that was kept on its books. The latter was always a subject that greatly alarmed the American Express board, mostly made up of industrialists, like David Culver and Richard Furlaud, who had a collective heart attack when they saw a balance sheet of $90 billion. “To them this meant huge risk must be being taken,” says Cohen.
In fact this was not necessarily the case. The balance sheet was often inflated by low-risk hedged U.S. Treasury trades and repurchase agreements (repos)—a common practice on Wall Street, but not in the more conservative credit card business. “They [Amex] didn’t quite get the mechanics of the whole thing,” said one source.
Cohen told Fuld to make sure that at the end of
The Lehman executives thought that the Shearson brokers were self-centered idiots; the Shearson brokers had little comprehension of what the Lehman guys were doing. As for Lehman Commercial Paper Inc. (LCPI)? They thought they were the modern -day equivalent of the Three Musketeers--“all for one, one for all.”
“They were the only unit in the entire organization which had salaries and systems entirely for themselves,” says Peter Cohen. More than 20 years later he still sounded irritated by that.
They proudly identified themselves as the working class of Wall Street, and in their rarefied circles—and bank accounts—they were. They smirked at the extravagances of Cohen, who at 38 was the CEO of Shearson Lehman. He was an easy target. At a year-end party hosted at the Greenbrier resort in White Sulfur Springs, West Virginia, Cohen arrived atop an elephant.
“A circus had been provided as part of the entertainment, and someone said ‘Why don’t you ride an elephant?’ so I did,” he explains.
But the moment became a running joke among the Lehman traders.
Cohen had worked his way up the operational side of Shearson, but had little experience in investment banking and none in capital markets; he was resented.
Joe Gregory told people that Cohen’s first meeting with the Lehman team was a disaster--Cohen had come to placate his new employees, but he only enraged them. He came across as high -handed and was met not with obedience, but with derision.
“Basically he came in and told us that each January his brokers knew they would make a million dollars that year,” says Bob Shapiro. “It was meant to be inspirational but what it showed was that he had no idea who his audience was. We were people who could lose a million in the final two weeks of the year. That was our business. It showed us he had no clue about what we actually did.”
“Of course they didn’t like me,” Cohen retorts. “I was younger than a lot of them, I was their boss, and they were a bunch of difficult guys.”
----
The Lehman veterans continued to isolate themselves from the rest of the company. In a small sign of rebellion, Pettit’s troops answered their phones with “Lehman,” snipping off the prefix “Shearson.”
“They were tough people, and they made money,” recalls John Cecil, a McKinsey consultant who was brought in by Pettit and who would later become the firm’s chief financial officer. “No one wanted to mess with them, because they were known as people who’d push back if you’d try to tell them what to do. They took over other businesses in the company, and they hired most of the other people who went on to be senior management.”
Cohen tried to exert control over LCPI , but this was a revolution that wouldn’t be put down. The Lehmanites took pride in running circles around him.
----
Cohen had to negotiate between LCPI and Shearson/American Express mainly over two subjects: LCPI ‘s compensation and the amount of leverage (or, as the American Express board saw it, risk) that was kept on its books. The latter was always a subject that greatly alarmed the American Express board, mostly made up of industrialists, like David Culver and Richard Furlaud, who had a collective heart attack when they saw a balance sheet of $90 billion. “To them this meant huge risk must be being taken,” says Cohen.
In fact this was not necessarily the case. The balance sheet was often inflated by low-risk hedged U.S. Treasury trades and repurchase agreements (repos)—a common practice on Wall Street, but not in the more conservative credit card business. “They [Amex] didn’t quite get the mechanics of the whole thing,” said one source.
Cohen told Fuld to make sure that at the end of
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