Lewis Glucksman was raised on Manhattan’s upper West Side, in more comfortable surroundings than Pete Peterson enjoyed in Kearney, Nebraska. His parents, unlike Peterson’s, were both born in America, the children of Hungarian Jews.* His mother, Zipporah, cared for a series of West End Avenue apartments (they moved frequently) as well as the three children, of whom Lewis was the second. His father, Jack Glucksman, owned a factory that assembled table lamps, and though he lacked a college education the senior Glucksman was well traveled in search of marble for his lamps. The family was not rich, but had enough money to own an automobile in 1939, a considerable luxury at the time. Lewis graduated with about a ninety average from DeWitt Clinton high school in 1941 at the age of fifteen, though he failed one course: analytic geometry. His father knew a Congressman from Indiana who urged him to send Lewis to the University of Indiana. After a brief visit Jack Glucksman agreed. Lewis stayed a year, but because transportation from New York to Indiana was difficult during the war, Glucksman transferred to the College of William and Mary, a school that now claims him as a loyal member of its board of visitors. He also serves on the board of sponsors of its business school.

On his seventeenth birthday, Glucksman lied about his age and enlisted in the Navy, where he served on a submarine chaser in the Atlantic. The Navy, he says, taught him that loyalty begets loyalty, up and down the line. It also aroused a lifelong interest in both naval warfare and marine life. Glucksman was released from the Navy a lieutenant in June 1946 and returned to William and Mary that fall, where he changed his major from pre-med to accounting.

With a liberal arts and accounting degree, in 1947 Glucksman migrated to Wall Street, where he first went to work as a credit reporter with Dun & Bradstreet. He then held a series of other unsatisfactory jobs. Restless, he enrolled nights at New York University’s Business School, receiving an M.B.A. in finance in 1951. He credits the years at N.Y.U. with opening his “intellectual horizons”; his gratitude is evident through his service as an N.Y.U. trustee and his sponsorship of the L. Glucksman Institute for Research in Securities Markets at the N.Y.U. Graduate School of Business Administration.

In 1952, Glucksman became a securities analyst at A. G. Becker, a Wall Street investment bank. He left to become an arbitrageur—purchasing securities, commodities or currency in one market and selling them at a better price in another market—for L. F. Rothschild in 1954. During his four years at Rothschild, Glucksman met and married Inez Salinger, who worked as an editor at a book publishing company. He returned to Becker in 1958, as co-manager of its new commercial paper business. At that time, he recalls, only Goldman, Sachs was in this business, and Becker was so determined to catch up that they offered Glucksman a percentage of the profits. Within five years he says he built a $1 billion-plus business, pioneered new commercial paper products, and was earning up to $2 million annually.

Bobbie Lehman was jealous of Becker’s commercial paper operation and of Gus Levy’s successes at Goldman. It bothered him that his clients went to Goldman or Becker to issue and trade paper. Although there was resistance to forming a trading facility at Lehman, resistance to hiring the “pushy” Glucksman, as some referred to him, and reluctance to raid another firm—it was then considered ungentlemanly—Bobbie hired Lew Glucksman and much of his Becker team in 1962 to launch Lehman Commercial Paper, Inc. Glucksman says Lehman offered him 10 percent ownership of the subsidiary in return for an investment of $35,000.

Glucksman felt he had arrived. “From my kind of background,” he says, “Lehman epitomized a level of success in banking that was not generally available. They were the pillars. You looked upon Lehman as the furthest you could go.”

Glucksman’s rise at Lehman was swift. He became a partner in 1967, one of only a handful of nonbanking partners. He was placed in charge of all money market and trading activities in 1969, elevated to the board in 1971, and to the executive committee in 1972; by 1981 he was president and chief operating officer, and most Lehman managers reported to him. Glucksman’s rise coincided with the ascendancy of trading at Lehman and on Wall Street in general. In 1975 the fixed income and securities divisions at Lehman provided $18.5 million of Lehman’s pre-tax and pre-bonus profits; by 1983 this number had soared to $127.4 million. And by 1983, Lehman’s securities trading and distribution functions employed 1,863 people. Begun as an appendage to banking, by 1983 trading and distribution accounted for more than two-thirds of Lehman’s profits.

The firm Glucksman joined included many talented individuals who liked to celebrate their “entrepreneurial spirit,” their ability to “get tough deals done.” However, even then some partners complained, as partners would later, that Lehman was too entrepreneurial, too loosely managed, too narrowly preoccupied with individual rather than team success. “Lehman Brothers was a culture of the virtuoso,” observes Joseph Thomas’s son, Michael, who left Lehman in 1971 and went on to become a successful author. “Lehman Brothers was like the New York Philharmonic: great musicians who are impossible to conduct.”

At Lehman, in the ten years Peterson presided, bonuses hinged largely on seniority and on profits that they as individuals claimed or were given credit for, rather than on a fixed percentage of the firm’s overall profits for a two-year period, as is the practice among the seventy-three partners at Goldman, Sachs. At Morgan Stanley all seventy-six partners are on the board of directors, and meet monthly. Lehman, with its looser structure, placed a premium on the individual rather than on the team. For years there was no central filing system. Partners tended to hoard their clients. Lehman board deliberations were cloaked in secrecy, and for the last year of its life as a private partnership no minutes were kept of board meetings. Even as late as 1982, when Glucksman and Peterson wanted to get rid of the executive committee, they did not have an open dialogue or even make an announcement; they simply abrogated it by no longer inviting members to meet. Lehman’s corporate culture, many say, was poisoned by an every-man-for-himself ethos. Personal ambition and greed are essential to the success of a banking firm, but other qualities contribute to success, including teamwork, leadership, strong management, luck, a common tradition or culture. The knock on Lehman Brothers was that it placed too much emphasis on individual greed—“blood money,” former partner Eric Gleacher calls it—and too little emphasis on common purpose. As long as profits expanded, partners worked together, were willing to suffer the cruelest indignities. In bad times, as Fred Ehrman learned, authority dissolved because it was not bound by anything but individual greed.

Few Lehman partners disagree that the highly individualistic Lehman culture attracted great talent and also great problems. But by common consent, the one Lehman division that had enjoyed a corporate sense of teamwork was Glucksman’s commercial paper division. Yves-André Istel, who was a senior international banker at Lehman, had his share of run-ins with Glucksman, and ultimately left for First Boston in the fall of 1983. Nevertheless, Istel described Glucksman’s operations this way: “Commercial paper—which was Glucksman—was the best managed, had the best esprit de corps, and was the best run—almost a separate company. That may have been the best part of Lehman in terms of the way it was managed, the way it thought of itself, and in terms of quality of operation.”

In 1973, the year Peterson joined the firm, Glucksman had built the commercial paper division to a hundred and nineteen employees, but that year the bond market collapsed. The commercial paper division sustained stunning losses. A Lehman internal audit found that by the summer of 1973 the “aggregate dollar amount positioned for speculation” by Lehman Commercial Paper had reached $496 million; Glucksman was investing Lehman’s own capital in certificates of deposit and other commercial paper, rather than just selling this paper to investors. The memo also said Glucksman’s operation “had an unrealized market loss at July 31, 1973, of about $6.7 million.” Glucksman, like other traders, had been playing his hunches, betting that interest rates would drop. If they did, Lehman would realize massive gains from its commercial paper holdings and from New York State Housing Finance Agency notes Lehman had also invested in. Instead, rates rose, cutting sharply into the value of Lehman’s bulging portfolio. Nor was Lehman the only firm to suffer trading losses at this time. Even such a premier trading house as Salomon Brothers turned in a $6.6 million loss for the year ending September 30, 1973.

This did not still the cry for Glucksman’s scalp among the forty-four partners, most of whom were in the banking department (by late 1973, the commercial paper division included only three partners). Fred Ehrman was determined, says George Ball, “to kick Glucksman out of the firm because of the losses.” Several of the senior partners—including Paul Davies, Lucius Clay and Herman Kahn—thought the overweight trader with the stains on his tie was “crude.” Herman Kahn couldn’t shake the memory of how Glucksman had spoken in the presence of “the golden bull,” as he called Bobbie Lehman: “He was obscene to the point that one time I went to him and said, ‘You don’t say, “I don’t give a rat’s ass!” in front of Bobbie Lehman.’” Glucksman could feel the pressure building, but few partners spoke to him about their unhappiness. The Lehman way was to whisper, to form cabals. “Glucksman told me we had to sever our relationship because Ehrman was after him and he didn’t want it to hurt me,” recalls banker Eric Gleacher, one of Glucksman’s few friends on the banking side. Gleacher ignored the advice, as did senior banking partner James Glanville, a member of the board who enjoyed challenging the powers-that-be at Lehman.

The partner who saved Glucksman’s scalp was Pete Peterson. By August, Peterson had taken Ehrman’s place and championed Glucksman, saying that the person who had the ability to dig them out of the hole they were in was the very person who had helped get them in it. Peterson dispatched Bob Rubin, a banking partner whom everyone conceded was brilliant, “to watch Lew and work with him,” remembers Peterson.

Rubin, who became a partner the same year as Glucksman, came to believe that Glucksman had been used as a “scapegoat” by bankers. He says Glucksman had sent regular memos to Ehrman and others, informing them of his decisions, and they were not challenged. Peterson has a different recollection, saying that Ehrman and Warren Hellman, the president, were “shocked by the losses” and that his own file contained no such memoranda from Glucksman. Hellman agrees with Peterson that he received no warning memos. But he also affirms Rubin’s position: “I don’t remember any memoranda from Lew. On the other hand, if you read the monthly gray book carefully, you could have picked up that Lehman’s government bond inventory was going up and up. The information was available.”

Glucksman’s feeling that he had been victimized was confirmed by Rubin, and Rubin would become Glucksman’s best friend at the firm, the financial whiz who could digest and poke holes in Glucksman’s brilliant financing schemes, the cautious adviser who slowed him down, who tempered his intuitive judgments with a cold eye, the fiercely private man who shared Glucksman’s view of them. To this day Glucksman remembers Rubin’s role in saving his neck, not Peterson’s. To Glucksman, Rubin was unlike many bankers in that he did not automatically hate all traders. Rubin was a loyal friend.

Under Peterson, Glucksman made a comeback. With Peterson concentrating on cost cutting, raising new capital, recruiting new business, crafting a full-service corporate plan and a marketing strategy, and selling Lehman to the outside world, Glucksman concentrated on rebuilding and expanding the firm’s trading capacities. By 1975, Lehman was in the black again, earning $24 million, pre-tax and pre-bonuses; and only one-quarter of these profits were generated by the banking department. “Glucksman was this mad genius type,” says former Lehman partner Kenneth Lipper. “He built this entire department in defiance of his environment. Of all the people at Lehman Brothers, Glucksman is the only one you could describe as a hero. He was a one-dimensional person. But his one dimension was so unique that he stood out. That was his greatness, and his destruction. He was a tormented person. He believed he was as good as anyone around him. And because he thought they wouldn’t accept him, he was going to beat them down.”

By November 1975, Pete Peterson appeared alone on the cover of Business Week, looking off into the distance. The cover story was entitled: “Back from the Brink Comes Lehman Bros.”

*Initially, Glucksman suggested that his family lived more modestly than was the case. After the Times pieces appeared, I asked him if there were any inaccuracies. He said his father actually owned the factory I had been led to believe he merely worked in.